UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
______________
Commission file number 000-22979
TRENDWEST RESORTS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-1004403
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
12301 N.E. 10th Place
Bellevue, Washington 98005
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (425) 990-2300
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 twelve 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
The number of shares of the registrant's no-par voting common stock
outstanding as of May 8, 1998: 17,593,366 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
Assets 1997 1998
---------------- ----------------
(Unaudited)
<S> <C> <C>
Assets:
Cash $ 70 $ 4,560
Restricted cash 1,219 1,393
Notes receivable, net of allowance for doubtful accounts, sales
returns and deferred gross profit 73,075 58,939
Accrued interest and other receivables 7,435 7,393
Residual interest in notes receivable sold 15,235 19,940
Receivable from Parent -- 1,311
Inventories 44,534 47,469
Property and equipment, net 7,057 7,961
Deferred income taxes 924 561
Other assets 2,201 2,766
---------- ----------
Total assets $ 151,750 $ 152,293
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable 944 1,763
Accrued liabilities 3,862 4,457
Accrued construction in progress 10,480 6,155
Due to Parent 1,947 --
Allowance for recourse liability and deferred gross profit on notes
receivable sold 8,757 9,868
Income taxes payable to Parent 2,755 --
Income taxes payable 880 2,061
---------- ----------
Total liabilities 29,625 24,304
Stockholders' equity:
Preferred stock, no par value. Authorized 10,000,000 shares;
no shares issued or outstanding -- --
Common stock, no par value. Authorized 90,000,000 shares;
issued and outstanding 17,593,366 shares 66,742 66,742
Retained earnings 55,383 61,247
---------- ----------
Total stockholders' equity 122,125 127,989
Commitments and contingencies -- --
---------- ----------
Total liabilities and stockholders' equity $ 151,750 $ 152,293
========== ==========
</TABLE>
See accompanying notes to the condensed combined and consolidated financial
statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Combined and Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1998
---------------- ----------------
<S> <C> <C>
Revenues:
Vacation Credit sales, net $ 27,945 $ 34,885
Finance income 3,219 3,198
Gains on sales of notes receivable -- 3,597
Resort management services 761 629
Other 688 519
---------- ----------
Total revenues 32,613 42,828
---------- ----------
Costs and operating expenses:
Vacation Credit cost of sales 7,553 9,513
Resort management services 259 276
Sales and marketing 13,131 17,635
General and administrative 2,968 3,789
Provision for doubtful accounts and recourse
liability 1,816 2,396
Interest 634 36
---------- ----------
Total costs and operating expenses 26,361 33,645
---------- ----------
Income before income taxes 6,252 9,183
Income tax expense 2,253 3,319
---------- ----------
Net income $ 3,999 $ 5,864
========== ==========
Basic and diluted net income per common share $ .28 .33
Basic and diluted weighted average shares of common stock outstanding 14,417,116 17,593,366
</TABLE>
See accompanying notes to the condensed combined and consolidated financial
statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Combined and Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------
1997 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,999 $ 5,864
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 154 197
Amortization of residual interest in notes receivable sold 949 1,402
Provision for doubtful accounts, sales returns and recourse 2,656 3,166
liability
Recoveries of notes receivable charged off 81 31
Residual interest in notes receivables sold -- (4,582)
Unrealized (gain) loss on residual interest in notes receivable sold (1,113) 44
Change in deferred gross profit (441) (226)
Deferred income tax expense (benefit) 63 363
Issuance of notes receivable (25,277) (31,078)
Proceeds from sale of notes receivable 624 38,488
Proceeds from repayment of notes receivable 5,250 5,401
Purchase of notes receivable (1,838) (2,104)
Changes in certain assets and liabilities:
Restricted cash (367) (174)
Inventories (1,831) (2,935)
Accounts payable and accrued liabilities 233 (2,911)
Income taxes payable to Parent 1,516 (2,755)
Income taxes payable -- 1,181
Other (531) (556)
------------ -----------
Net cash provided by (used in) operating activities (15,873) 8,816
------------ -----------
Cash flows used in investing activities -Purchase of property and equipment (630) (1,068)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 14,727 --
Payments on notes payable (646) --
Increase in Receivable from Parent -- (1,311)
Increase (decrease) in Due to Parent 2,448 (1,947)
----------- -----------
Net cash provided by (used in) financing activities 16,529 (3,258)
----------- -----------
Net increase in cash 26 4,490
Cash at beginning of period 93 70
----------- -----------
Cash at end of period $ 119 $ 4,560
=========== ===========
</TABLE>
See accompanying notes to the condensed combined and consolidated financial
statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Combined and Consolidated Statements of Cash Flows
(continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------
1997 1998
---------------- ----------------
<S> <C> <C>
Supplemental disclosures of cash flow information cash paid during the period
for:
Interest $ 735 $ 178
Income taxes 675 4,530
</TABLE>
See accompanying notes to combined and consolidated financial statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Notes to the Condensed Combined and Consolidated
Financial Statements
(dollars in thousands)
(Unaudited)
Note 1 - Background
Trendwest Resorts, Inc. (Company) markets, sells and finances timeshare
ownership interests in the form of perpetual timeshare credits (Vacation
Credits) in WorldMark, the Club (WorldMark). Vacation Credits are created
through the transfer to WorldMark of resort units acquired or developed by the
Company. The Company derives revenues primarily from Vacation Credit sales and,
to a lesser extent, from the financing of Vacation Credit sales and from its
management agreement with WorldMark.
These condensed combined and consolidated financial statements do not include
certain information and footnotes required by generally accepted accounting
principles for complete financial statements. However, in the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and are of a normal recurring nature. Operating results for the
three months ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1998.
These statements should be read in conjunction with the audited combined and
consolidated financial statements and footnotes included in the Company's 1997
Form 10-K filed with the Securities and Exchange Commission (SEC). The
accounting policies used in preparing these condensed combined and consolidated
financial statements are the same as those described in such Form 10-K.
Note 2 - Sale and Securitization of Notes Receivable
In March 1998, the Company sold $37.4 million of Notes Receivable to a
wholly-owned special purpose company, Trendwest Funding II, Inc. In addition,
the Bank Group sold $93.0 million of Notes Receivable purchased from TW
Holdings, Inc. to Trendwest Funding II, Inc. The special purpose company sold
the receivable to TRI Funding II, Inc. (TRI), a special purpose entity
wholly-owned by Trendwest Funding II, Inc., and TRI issued $130.4 million in two
classes of senior and subordinated notes to institutional investors. The 1998-1,
Class A notes were issued for $125.0 million at a fixed rate of 6.88%. The
1998-1, Class B notes were issued for $5.4 million at a fixed rate of 7.98%. The
Class A notes and Class B notes were rated `A" and `BBB' by Fitch IBCA, Inc.,
respectively, and are secured by the Notes Receivable owned by TRI. The ratings
reflect credit enhancements of a 4% over-collaterilization and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009.
Note 3 - Basic and Diluted Net Income Per Common Share
On August 15, 1997, the Company consummated the offering of 3,176,250 shares of
the Company's common stock at $18 per share resulting in net proceeds, after
deducting the related issuance costs, of approximately $51,772. In addition, the
Company issued 5,193,693 shares of common stock to the Parent to acquire two
wholly owned subsidiaries, TW Holdings and Trendwest Funding (Consolidation
Transactions). Effective June 30, 1997, TW Holdings and Trendwest Funding were
wholly-owned subsidiaries of the Company.
Basic and diluted net income per common share has been computed based on the
number of shares of Trendwest common stock outstanding and assumes the 5,193,693
shares issued to the Parent in connection with the 1997 Consolidation
Transactions have been outstanding for all periods presented.
<PAGE>
The following illustrates the reconciliation of weighted average shares used for
basic net income per share:
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1998
----------------- ------------------
<S> <C> <C>
Basic
Weighted average shares - Trendwest 9,223,423 17,593,366
Effect of consolidation transactions 5,193,693 --
------------- -------------
Basic and diluted weighted average shares outstanding 14,417,116 17,593,366
============= =============
</TABLE>
Net income available to common shareholders for basic net income per share was $
3,999 and $5,864 for the three months ended March 31, 1997 and 1998,
respectively.
There were no dilutive securities outstanding for the periods presented
resulting in basic and diluted net income per share being equal.
At March 31, 1998, there were options to purchase 499,000 shares of common stock
outstanding which were antidilutive in 1998 and therefore not included in the
computation of diluted net income per share.
Note 4 - Inventories
Inventories consist of Vacation Credits and construction in progress as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------------- ------------------
<S> <C> <C>
Vacation Credits $ 1,722 $ 9,251
Construction in progress 42,812 38,218
------------ ------------
Total inventories $ 44,534 $ 47,469
============ ============
</TABLE>
Note 5 - Allowance For Doubtful Accounts, Recourse Liability and Sales Returns
The activity in the allowance for doubtful accounts, recourse liability and
sales returns is as follows for the year ended December 31, 1997 and the three
months ended March 31, 1998:
<TABLE>
<CAPTION>
1997 1998
----------------- ------------------
<S> <C> <C>
Balances at beginning of period $ 11,241 $ 15,240
Provision for doubtful accounts, sales returns and 3,166
recourse liability 11,755
Notes receivable charged-off and sales returns net of
Vacation Credits recovered (7,888) (1,997)
Recoveries 132 31
------------ ------------
Balances at end of period $ 15,240 $ 16,440
============ ============
Allowance for doubtful accounts and sales returns $ 9,935 $ 9,899
Recourse Liability on notes receivable sold 5,305 6,541
------------ ------------
$ 15,240 $ 16,440
============ ============
</TABLE>
Total notes receivable outstanding, including notes receivable sold, amounted to
$242,286 and $255,279 at December 31, 1997 and March 31, 1998, respectively.
Note 6 - Commitments and Contingencies
(a) Purchase Commitments
The Company routinely enters into purchase agreements with various developers to
acquire and build resort properties. At March 31, 1998 the Company had
outstanding purchase commitments of $19,020 related to properties under
development.
(b) Litigation
The Company is involved in various claims and lawsuits arising from the ordinary
course of business. Management believes that outcome of these matters will not
have a material adverse effect on the Company's financial position, results of
operations, or liquidity.
Note 7 - Subsequent Event
On May 7, 1998, the Company entered into an $11.8 million agreement to purchase
land and develop a 111 unit resort at Rancho Vistoso near Tucson, Arizona.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The Company achieved total revenues of $42.8 million for the three months ended
March 31, 1998 compared to $32.6 million for the three months ended March 31,
1997, an increase of 31.3%. The principal reason for the overall improvement was
a 25.1% increase in Vacation Credit sales from $27.9 million for the three
months ended March 31, 1997 to $34.9 million for the three months ended March
31, 1998. The increase in Vacation Credit sales was primarily the result of a
26.6% increase in the number of Vacation Credits sold from 21.4 million in the
three months ended March 31, 1997 to 27.1 million in the three months ended
March 31, 1998. The increase in Vacation Credits sold was largely attributable
to new off-site sales offices in Costa Mesa, California opened in February 1997;
Woodland Hills, California, opened in October of 1997; relocating the Vallejo,
California office to Walnut Creek, California and increased Upgrade sales.
Revenues from Upgrade Sales increased 44.2% from $4.3 million for the three
months ended March 31, 1997 to $6.2 million for the three months ended March 31,
1998 due primarily to an increase of 55% in the number of Vacation Credits sold
as Upgrades during the three months ended March 31, 1997 compared to the three
months ended March 31, 1998. The average price per Vacation Credit sold
decreased slightly from $1.27 per credit for the three months ended March 31,
1997 versus $1.26 per credit for the three months ended March 31, 1998
reflecting a greater percentage of vacation credits sold as Upgrades which are
sold at a lower selling price.
Finance income for the three months ended March 31, 1997 was comparable to the
three months ended March 31, 1998 as the 1997 period benefitted from a $.8
million recognition of the unrealized gain on residual interest in Notes
Receivable sold, primarily from the adoption of Statement of Financial
Accounting Standards Number 125 (SFAS 125). Absent the above, increases in
finance income would have reflected the increase in carrying balances of Notes
Receivable for the two periods compared. Gains on sales of Notes Receivable
increased in 1998 because sales of notes receivable for the three months ended
March 31, 1997 were treated as secured borrowings because TW Holdings did not
meet the sales recognition criteria of SFAS 125. The asset backed securitization
consummated during the first quarter of 1998 resulted in recording gains on
$33.6 million of Notes Receivable sold. TW Holdings also recorded gains on $3.8
million of Notes Receivable sold to the Bank Group during the first quarter of
1998.
Vacation Credit cost of sales increased from $7.6 million for the three months
ended March 31, 1997 to $9.5 million for the three months ended March 31, 1998,
an increase of 25.0%, primarily reflecting the increase in sales of Vacation
Credits. As a percentage of Vacation Credit sales, Vacation Credit cost of sales
were comparable at 27.2% of Vacation Credit sales for each of the three months
ended March 31, 1997 and 1998.
Sales and marketing costs increased 34.4% from $13.1 million for the three
months ended March 31, 1997 to $17.6 million in the three months of 1998. As a
percentage of Vacation Credit sales, sales and marketing costs increased from
47.0% for the three months ended March 31, 1997 to 50.4% for the three months
ended March 31, 1998. This increase reflects start-up costs associated with
opening the Burlingame, California sales office in mid-March 1998, which costs
did not produce significant sales to any degree. In addition, training costs
associated with new salespeople and office personnel in the Southwest Region
also contributed to higher sales and marketing costs for the quarter.
General and administrative expenses increased 26.7% from $3.0 million for the
three months ended March 31, 1997 to $3.8 million for the three months ended
March 31, 1998. Absent the increase in gains on sales of Notes Receivable,
general and administrative expenses would have been higher as a percentage of
total revenue for the 1998 period as compared to the 1997 period due to
increased sales growth; inflationary pressure on wages, increased administration
costs resulting from being a publicly traded company and start-up expenses
associated with the new Southwest Region.
Provision for doubtful accounts and recourse liability increased 33.3 % from
$1.8 million for the three months ended March 31, 1997 to $2.4 million for the
three months ended March 31, 1998. As a percentage of Vacation Credit sales, the
provision increased from 6.5% for the three months ended March 31, 1997 to 6.9%
for the three months ended March 31, 1998 due to continued growth in the
carrying amount of Notes Receivable both on and off-balance sheet as well as
increased sales volume in California which has historically had higher default
rates than the Pacific Northwest.
The Company maintains an allowance for doubtful accounts in respect of the Notes
Receivable owned by the Company and an allowance for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these allowances at December 31, 1997 and March 31, 1998
were $15.2 million, and $16.4 million, respectively, representing approximately
6.3% and 6.4%, respectively, of the total portfolio of Notes Receivable at those
dates, including the Notes Receivable that had been sold by the Company. No
assurance can be given that these allowances will be adequate, and if the amount
of the Notes Receivable that are ultimately written off materially exceed the
related allowances, the Company's business, results of operations and financial
condition could be materially adversely affected.
The Company estimates its allowance for doubtful accounts and recourse liability
by analysis of bad debts by each sales site by year of Note Receivable
origination. The Company uses this historical analysis, in conjunction with
other factors such as local economic conditions and industry trends. The Company
also utilizes experience factors of more mature sales sites in establishing the
reserve for bad debts at new sales offices. The Company generally charges off
all receivables when they become 180 days past due and returns the credits
associated with such charge-offs to inventory. At March 31, 1998, 1.9% of the
Company's total receivables portfolio of $255.3 million were more than 60 days
past due.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash from operations from down payments on sales of
Vacation Credits which are financed, cash sales of Vacation Credits, principal
and interest on Notes Receivable, and proceeds from sales and borrowings
collateralized by Notes Receivable. The Company also generates cash on the
interest differential between the interest charged on the Notes Receivable and
the interest paid on loans collateralized by Notes Receivable.
During the three months ended March 31, 1997 and 1998, cash (used in) provided
by operating activities was ($15.9) million and $8.8 million, respectively. Cash
generated from operating activities increased principally due to the increased
sales of Notes Receivable. For the first three months of 1997, cash used in
operating activities was principally for the issuance and purchase of Notes
Receivable of $27.1 million to finance the purchase of Vacation Credits by
Owners and an increase in inventory of $1.8 million due to additional
construction in progress to meet increasing sales demand. Cash provided by
operating activities resulted primarily from sales and repayments of Notes
Receivable of $5.9 million, and net income of $4.0 million. For the three months
ended March 31, 1998, cash used in operating activities was principally for the
issuance and purchase of Notes Receivable of $31.6 million to finance the
purchase of Vacation Credits by Owners and an increase in inventory of $2.9
million due to additional construction in progress to meet increasing sales
demand. Cash provided by operating activities resulted primarily from the sale
and repayment of Notes Receivable of $43.9 million and net income of $5.9
million. The increase in proceeds from sales of Notes Receivable in the first
three months of 1998 as compared with same period last year was due in part to
treating the transfer of such receivables to the Bank Group after January 1,
1997 and prior to June 30, 1997 as secured borrowing as TW Holdings did not meet
the sales recognition criteria of SFAS 125.
Net cash used in investing activities for the three months ended March 31, 1997
and 1998 was $0.6 and $1.1 million, respectively. Cash used in the acquisition
of property and equipment was primarily used to acquire furniture and fixtures
and data processing equipment required to meet the growth of the Company.
Net cash provided by (used in) financing activities for the three months ended
March 31, 1997 and 1998, was $16.5 million and ($3.3) million, respectively. For
the three months ended March 31, 1997, cash provided by financing activities
resulted primarily from the issuance of notes payable of $14.7 million in
conjunction with the sale of Notes Receivable from TW Holdings which was treated
as a secured borrowing as the transaction did not meet the sales recognition
criteria of SFAS 125. For the three months ended March 31, 1998, cash used in
financing activities was principally the result of payments to the Parent on the
revolving line of credit of $1.9 million and advancing excess funds to the
Parent of $1.3 million.
Financing of Notes Receivable has been accomplished by use of a $98.0 million
purchase commitment from the Bank Group through TW Holdings. As of March 31,
1998, Notes Receivable totaling $5.0 million had been transferred to the Bank
Group. The agreement with the Bank Group is subject to annual renewal on June 30
of each year. The interest rate on borrowings under the agreement with the Bank
Group is currently LIBOR plus 125 basis points. In the future, the Company may
hypothecate its Notes Receivable.
The Company has a $10 million open line of credit with the Parent which bears
interest at prime plus 1% (currently 9.5%) per annum. The line of credit is
payable on demand. As of March 31, 1998, there was not any outstanding
indebtedness to the Parent. The Company may advance excess funds to the Parent
at prime rate minus 2% (currently 6.5%) per annum. At March 31, 1998, there was
a $1.3 million Receivable from Parent.
In February 1998, the Company entered into a Credit Agreement with a group of
banks to provide the Company with a three-year unsecured revolving credit
facility for $30 million. The credit agreement provides for borrowings at the
reference rate as announced by Bank of America, NT&SA or at LIBOR plus 100 basis
points. The Credit Agreement provides for a commitment fee to the banks of 30
basis points per annum on the total unused amount of the commitment.
Availability under the line of credit is subject to a borrowing base which is a
percentage of unencumbered Notes Receivable and inventory, including property
under development. Under the terms of the Credit Agreement, the Company is
required to maintain certain interest coverage ratios and capitalization ratios.
The Credit Agreement also imposes limitations on certain liens and carrying
amounts of inventory and matures on February 12, 2001. The Company plans to use
this facility to meet short-term working capital needs.
In March 1998, the Company sold $37.4 million of Notes Receivable to a
wholly-owned special purpose company, Trendwest Funding II, Inc. In addition,
the Bank Group sold $93.0 million of Notes Receivable purchased from TW
Holdings, Inc. to Trendwest Funding II, Inc. The special purpose company sold
the receivable to TRI Funding II, Inc. (TRI), a special purpose entity
wholly-owned by Trendwest Funding II, Inc., and TRI issued $130.4 million in two
classes of senior and subordinated notes to institutional investors. The 1998-1,
Class A notes were issued for $125.0 million at a fixed rate of 6.88%. The
1998-1, Class B notes were issued for $5.4 million at a fixed rate of 7.98%. The
Class A notes and Class B notes were rated `A" and `BBB' by Fitch IBCA, Inc.,
respectively, and are secured by the Notes Receivable owned by TRI. The ratings
reflect credit enhancements of a 4% over-collaterilization and a 2% minimum
reserve account. The notes have a stated maturity of April 15, 2009. Upon
completion of this financing, the Company had $93.0 million of availability
under the TW Holdings facility and $30.0 million under the revolving credit
agreement.
Through the end of 1998, the Company anticipates spending approximately $38.5
million for acquisitions and development of new resort properties and for
expansion and development activities. The Company plans to fund these
expenditures with cash generated from operations, including further sales and
securitizations of Notes Receivable. The Company believes that, with respect to
its current operations, cash generated from operations and future borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the end of 1998.
WorldMark maintains a replacement reserve for the WorldMark Resorts which is
funded from the annual assessments of the Owners. At March 31, 1998, the amount
of such reserve was approximately $6.0 million. The replacement reserve is
utilized to refurbish and replace the interiors and furnishings of the
condominium units and to maintain the exteriors and common areas in WorldMark
Resorts in which all units are owned by WorldMark. The Company may advance funds
to WorldMark from time to time.
Since completed units at various resort properties are acquired or developed in
advance and a significant portion of the purchase price of Vacation Credits is
financed by the Company, the Company continually needs funds to acquire and
develop property, to carry Notes Receivable contracts and to provide working
capital. The Company has historically secured additional funds through loans
from the Parent and the sale of Notes Receivable through the Finance
Subsidiaries. See "Risk Factors - Dependence on Acquisitions of Additional
Resort Units for Growth; Need for Additional Capital" of the Company's 1997 Form
10-K.
In the future, the Company may negotiate additional credit facilities, or issue
corporate debt or equity securities. Any debt incurred or issued by the Company
may be secured or unsecured, at a fixed or variable interest rate, and may be
subject to such additional terms as management deems appropriate.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Incorporated by reference. See Note 6 of "Notes to Condensed Combined and
Consolidated Financial Statements."
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matter to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Restated Articles of Incorporation (1)
2.2 Restated Bylaws (1)
10.31 Indenture among the Registrant, TRI Funding II, Inc. and LaSalle
National Bank, dated as of March 1, 1998.
10.32 Series 1998-1 Supplement Dated as of March 1, 1998 to Indenture
Dated as of March 1, 1998 among the Registrant,
Trendwest Funding II, Inc. and LaSalle National Bank.
10.33 Servicing Agreement among the Registrant, TRI Funding II, Inc.,
Sage Systems, Inc. and LaSalle National Bank,
dated as of March 1,1998.
10.34 Purchase and Sale Agreement between the Registrant,
Trendwest Funding II, Inc. and TRI Funding II, Inc.
10.35 Receivables purchase agreement among the Registrant,
TRI Funding Company I, L.L.C., TW Holdings Inc. and
Trendwest Funding II, Inc., Dated as of March 1, 1998.
10.36 Credit Agreement among the Registrant, Bank of America National Trust
and Savings Association as Agent, and Other
Financial Institutions Party Hereto, Dated as of February 12, 1998.
11 Statement re: Computation of Earnings per share
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement on
Form S-1 (File No. 333-26861).
(a) Reports on Form 8-K
None
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.
TRENDWEST RESORTS, INC.
Date: May 14, 1998 /s/ WILLIAM F. PEARE
--------------------- ---------------------------------------
William F. Peare
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: May 14, 1998 /s/ GARY A. FLORENCE
--------------------- ---------------------------------------
Gary A. Florence
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
<PAGE>
(This page intentionally left blank.)
===============================================================================
INDENTURE
among
TRI FUNDING II, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer")
and
LASALLE NATIONAL BANK
("Trustee")
Dated as of March 1, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
Parties 1
Preliminary Statement.......................................................1
Granting Clause.............................................................1
ARTICLE ONE DEFINITIONS...............................................2
Section 1.01 Definitions..................................................2
ARTICLE TWO NOTE FORM............................................15
Section 2.01 Form........................................................15
ARTICLE THREE THE NOTES............................................15
Section 3.01 Denomination................................................15
Section 3.02 Execution, Authentication, Delivery and Dating..............16
Section 3.03 Notes as Debt...............................................17
Section 3.04 Registration, Registration of Transfer and Exchange.........17
Section 3.05 Limitation on Transfer and Exchange.........................18
Section 3.06 Mutilated, Destroyed, Lost or Stolen Notes..................19
Section 3.07 Payment of Principal and Interest; Principal and Interest Rights
Preserved...................................................20
Section 3.08 Persons Deemed Owner........................................21
Section 3.09 Cancellation................................................21
ARTICLE FOUR ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF COLLATERAL....21
Section 4.01 Conditions to Original Issuance of Notes....................21
Section 4.02 Security for Notes..........................................24
Section 4.03 Substitution and Purchase of Receivables; Upgrade Contracts.24
Section 4.04 Releases....................................................26
Section 4.05 Trust Estate................................................28
Section 4.06 Notice of Release...........................................28
Section 4.07 Opinions as to Trust Estate.................................28
Section 4.08. Classes.....................................................29
ARTICLE FIVE SATISFACTION AND DISCHARGE...........................29
Section 5.01 Satisfaction and Discharge of Indenture.....................29
ARTICLE SIX DEFAULTS AND REMEDIES.................................29
Section 6.01 Events of Default............................................29
Section 6.02 Acceleration of Maturity; Rescission and Annulment...........31
Section 6.03 Collection of Indebtedness and Suits for Enforcement
by Trustee...................................................32
Section 6.04 Remedies.....................................................32
Section 6.05 Optional Preservation of Trust Estate........................33
Section 6.06 Trustee May File Proofs of Claim.............................33
Section 6.07 Trustee May Enforce Claims Without Possession of Notes.......34
Section 6.08 Application of Money Collected...............................34
Section 6.10 Unconditional Right of Noteholders to Receive Principal
and Interest.............................35
Section 6.11 Restoration of Rights and Remedies...........................35
Section 6.12 Rights and Remedies Cumulative...............................36
Section 6.13 Delay or Omission; Not Waiver................................36
Section 6.14 Control by Noteholders.......................................36
Section 6.15 Waiver of Past Defaults......................................37
Section 6.16 Undertaking for Costs........................................37
Section 6.17 Waiver of Stay or Extension Laws.............................37
Section 6.18 Sale of Trust Estate.........................................37
Section 6.19 Action on Notes..............................................38
ARTICLE SEVEN THE TRUSTEE...........................................39
Section 7.01 Certain Duties and Responsibilities..........................39
Section 7.02 Notice of Default............................................41
Section 7.03 Certain Rights of Trustee....................................41
Section 7.04 Not Responsible for Recitals or Issuance of Notes............42
Section 7.05 May Hold Notes...............................................43
Section 7.06 Money Held in Trust..........................................43
Section 7.07 Compensation and Reimbursement...............................43
Section 7.08 Corporate Trustee Required; Eligibility......................44
Section 7.09 Resignation and Removal; Appointment of Successor............45
Section 7.10 Acceptance of Appointment by Successor.......................45
Section 7.11 Merger, Conversion, Consolidation or Succession to Business of
Trustee......................................................46
Section 7.12 Co-Trustees and Separate Trustees............................46
Section 7.13 Rights with Respect to the Servicer..........................47
Section 7.14 Appointment of Authenticating Agent..........................47
Section 7.15 Custodian to Hold Contracts..................................49
ARTICLE EIGHT OPTIONAL PURCHASE OF RECEIVABLES......................49
Section 8.01 Optional Purchase of All Receivables.........................49
ARTICLE NINE SUPPLEMENTAL INDENTURES...............................50
Section 9.01 Supplemental Indentures Without Consent of Noteholders.......50
Section 9.02 Supplemental Indentures with Consent of Noteholders..........51
Section 9.03 Execution of Supplemental Indentures.........................52
Section 9.04 Effect of Supplemental Indentures............................52
Section 9.05 Reference in Notes to Supplemental Indentures................52
ARTICLE TEN REDEMPTION OF NOTES..................................53
Section 10.01 Redemption at the Option of the Issuer; Election to Redeem...53
Section 10.02 Notice to Trustee............................................53
Section 10.03 Notice of Redemption by the Issuer...........................53
Section 10.04 Deposit of the Redemption Price..............................54
Section 10.05 Notes Payable on Redemption Date.............................54
ARTICLE ELEVEN REPRESENTATIONS, WARRANTIES AND COVENANTS.............54
Section 11.01 Representations and Warranties...............................54
Section 11.02 Covenants....................................................58
Section 11.03 Other Matters as to the Issuer...............................64
ARTICLE TWELVE ACCOUNTS AND ACCOUNTINGS..............................64
Section 12.01 Collection of Money..........................................64
Section 12.02 Collection Account...........................................64
Section 12.03 Reserve Accounts............................................66
Section 12.04 Reports by Trustee to Noteholders............................67
ARTICLE THIRTEEN PROVISIONS OF GENERAL APPLICATION..........................67
Section 13.01 Acts of Noteholders..........................................67
Section 13.02 Notices, etc., to Trustee, Issuer, Servicer and the
Rating Agency...............................68
Section 13.03 Notices and Other Documents to Noteholders; Waiver...........69
Section 13.04 Effect of Headings and Table of Contents.....................69
Section 13.05 Successors and Assigns.......................................69
Section 13.06 Separability.................................................69
Section 13.07 Benefits of Indenture........................................69
Section 13.08 Legal Holidays...............................................69
Section 13.09 Governing Law................................................70
Section 13.10 Counterparts.................................................70
Section 13.11 Obligation...................................................70
Section 13.12 Compliance Certificates and Opinions.........................70
Section 13.13 Effective Date of Transactions...............................71
Section 13.14. Duties of the Parties.......................................71
Signatures..................................................................72
<PAGE>
EXHIBIT A Form of Investment Letter
EXHIBIT B Form of Supplement for Grant of Substitute
Contracts and Upgrade Contracts
EXHIBIT C Form of Certificate of Issuer and Servicer
<PAGE>
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INDENTURE, dated as of March 1, 1998 (herein, as amended and
supplemented from time to time as permitted hereby, called this "Indenture"),
among TRI FUNDING II, INC., a Delaware corporation (herein, together with its
permitted successors and assigns, called the "Issuer"), TRENDWEST RESORTS, INC.,
an Oregon corporation, as servicer, and LASALLE NATIONAL BANK, a nationally
chartered bank, as trustee.
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of the Issuer's notes
(hereinafter called the "Notes"), issuable in one or more series as provided in
this Indenture, and each Series of which shall be limited as to principal amount
as set forth in the related Series Supplement. All covenants and agreements made
by the Issuer, the Servicer and the Trustee herein are for the benefit and
security of the Holders of the Notes. The Issuer, the Servicer and the Trustee
are entering into this Indenture, and the Trustee is accepting the trusts
created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer, the Servicer and the Trustee in accordance with its terms have been
done.
GRANTING CLAUSE
To secure the payment of the principal of and interest on the Notes of
each Series in accordance with their terms, the payment of all of the sums
payable under this Indenture and the performance of the covenants contained in
this Indenture, the Issuer hereby Grants to the Trustee, solely in trust and as
collateral security as provided in this Indenture, for the benefit of the
Holders of the Notes of each Series in so far as the following, in each case,
relates to the Receivables and other interests, rights and properties granted
pursuant to the Series Supplement with respect to such Series, all of the
Issuer's rights, title and interest in and to the following whether now owned or
hereafter acquired and any and all benefits accruing to the Issuer from: (a) the
Receivables Purchase Agreement; (b) the Sale Agreement; (c) the Servicing
Agreement; (d) the Clearing Account; and (e) proceeds of the foregoing
(including, but not by way of limitation, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and every
kind, and other forms of obligations and receivables which at any time
constitute all or part or are included in the proceeds of any of the foregoing).
In addition, the Issuer will Grant to the Trustee additional interests, rights
and properties pursuant to the Series Supplement relating to each Series (which,
for each Series, together with the interests, rights and properties Granted
above, shall be referred to as the "Series Collateral" or the "Series Trust
Estate").
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and agrees to perform the duties herein
required to the best of its ability to the end that the interests of the
Noteholders may be adequately and effectively protected.
ARTICLE ONE DEFINITIONS
Section 1.01 Definitions. Except as otherwise expressly provided
herein or unless the context otherwise requires, the following terms have the
respective meanings set forth below for all purposes of this Indenture, and the
definitions of such terms are equally applicable both to the singular and plural
forms of such terms.
"Acquisition Consideration": The meaning specified in the Receivables
Purchase Agreement.
"Act": With respect to any Noteholder, the meaning specified in Section
13.01.
"Affiliate": At any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of such
first mentioned Person or any Person of which such first mentioned Person
beneficially owns or holds, in the aggregate, directly or indirectly, 10% or
more of any class of voting or equity interests. As used in this definition,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Aggregate Collateral Value": With respect to any Series and as of any
date, the sum of the aggregate of the Collateral Values of the Contracts pledged
by the Issuer to the Trustee to support the Notes of such Series outstanding at
such date; provided, however, that the Collateral Value of any Defaulted
Contract shall not be included in the calculation of Aggregate Collateral Value
in any Due Period after the Due Period in which such Contract became a Defaulted
Contract.
"Asset Assignment": The meaning specified in the Receivables Purchase
Agreement.
"Assignment": The meaning specified in the Sale Agreement.
"Authenticating Agent": With respect to each Series, any entity appointed
by the Trustee pursuant to Section 7.14 hereof.
"Board of Directors": Either the board of directors of the Issuer or of the
Servicer, as the context requires, or any duly authorized committee of such
Board.
"Board Resolution": A copy of a resolution delivered to the Trustee and
certified by the Secretary or an Assistant Secretary of the Servicer or the
Issuer, as the case may be, to have been duly adopted by its respective Board of
Directors and to be in full force and effect on the date of such certification.
"Business Day": Any day other than a Saturday, a Sunday or a day on
which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee is located are authorized or obligated by
law or executive order to close.
"Calculation Date": The last day of a Due Period.
"Cash Accumulation Event": With respect to any Series, the meaning set
forth in the related Series Supplement.
"Class": With respect to any Series of Notes, any class of Notes of such
Series established pursuant to a Series Supplement.
"Clearing Account": The meaning specified in the Servicing Agreement.
"Closing Date": March 12, 1998, the date that the Transaction Documents are
originally executed and delivered by the parties thereto.
"Club" or "WorldMark": WorldMark, the Club, a California nonprofit mutual
benefit corporation, and its successors in interest.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral Value": With respect to each Receivable as of any
Calculation Date, the amount of principal outstanding with respect to such
Receivable at the end of such Calculation Date (without giving effect to any
write-off or writedown of such Receivable).
"Collection Account": With respect to each Series, the account or accounts
created and maintained pursuant to Section 12.02 hereof.
"Collection Account Bank": The meaning specified in the Servicing
Agreement.
"Competitor" shall mean any Person which is engaged in the vacation time
share business.
"Contract Files": The meaning specified in the Sale Agreement.
"Contracts": The retail installment contracts (and all rights with respect
thereto, including all guaranties and other agreements or arrangements of
whatever character from time to time supporting or securing payment of any such
contract and all rights with respect to the Credits to the extent specifically
related to any such contract), certain interests in which are acquired by the
Issuer from time to time pursuant to the Sale Agreement and identified on the
Contract Schedule attached to the applicable Series Supplement as Schedule A,
including Substitute Contracts and Upgrade Contracts, and any amendments, riders
and annexes thereto; provided that, from and after the date on which a
Receivable relating to a Contract is purchased or substituted by the Issuer, TFI
or Trendwest in accordance with Section 4.03 hereof, such Contract shall no
longer constitute a "Contract" for purposes of the Transaction Documents.
"Controlling Class": With respect to each Series, the meaning set forth in
the related Series Supplement.
"Corporate Trust Office": The principal corporate trust office of the
Trustee located at 135 South LaSalle Street, Suite 1625, Chicago, Illinois
60674, Attention: Asset Backed Securities Trust Services Group--Trendwest
Funding II [specify Series], or at such other address as the Trustee may
designate from time to time by notice to the Noteholders and the Issuer, or the
principal corporate trust office of any successor Trustee.
"Credits": The vacation credits financed by an Obligor pursuant to a
Contract.
"Custodian": With respect to each Series, Sage Systems, Inc., a Washington
corporation, and its permitted successors and assigns.
"Custodian Files": The meaning set forth in the Sale Agreement.
"Default": Any occurrence or circumstance which with notice or the
lapse of time or both would become an Event of Default.
"Default Rate": With respect to any Series for any Due Period, the sum of
the Collateral Values as of the Calculation Date occurring in such Due Period of
all Contracts supporting such Series that became Defaulted Contracts in such Due
Period and remained Defaulted Contracts as of such Calculation Date divided by
the Aggregate Collateral Value for such Series on the Calculation Date
immediately preceding such Due Period.
"Defaulted Contract": A Contract shall become a Defaulted Contract at the
earliest of (i) the date on which the Servicer receives notice that the related
Obligor has (or, if a Contract has two Obligors, both Obligors have) become the
subject of bankruptcy proceedings, (ii) the Calculation Date on which any
portion of the related Receivable would (if such Receivable were owned by
Trendwest) be written off Trendwest's financial statements or books of account
or would otherwise be deemed uncollectible in the normal course of business (for
reasons other than disputes of amounts owed with respect to such Receivable),
(iii) the Calculation Date on which all or part of any Scheduled Payment with
respect to such Contract has not been received and remains unpaid for a period
of 180 or more days as of such Calculation Date or (iv) the date on which the
related Obligor has (or, if a Contract has two Obligors, both Obligors have)
given notice to the Servicer, or the Servicer otherwise has reason to believe,
that the related Receivable will not be paid (for reasons other than disputes of
amounts owed with respect to such Receivable).
"Delinquent Contract": As of any Calculation Date, a Contract (a) as to
which a Scheduled Payment was not received by or on behalf of the Issuer within
60 days of when such Scheduled Payment was due and remains unpaid as of such
Calculation Date and (b) is not a Defaulted Contract.
"Delinquency Level": With respect to any Series for any Due Period, the
sum of the Collateral Values as of the Calculation Date occurring in such Due
Period of all Delinquent Contracts supporting such Series as of such Calculation
Date, divided by the Aggregate Collateral Value of such Series on the
Calculation Date immediately preceding such Due Period.
"Delivery Date": The date on which a Note is issued in accordance with this
Indenture.
"Determination Date": The fifth day preceding each Payment Date or, if such
day is not a Business Day, the next succeeding Business Day.
"Distribution Account": With respect to each Series, the trust account
created and maintained pursuant to Section 12.02 hereof.
"Due Date": With respect to each Receivable, the date of the month on which
payment is due thereunder.
"Due Period": As to any Determination Date or Payment Date, as the case
may be, the period beginning on and including the first day and ending at the
end of the last day of the calendar month preceding the month in which such
Determination Date or Payment Date, as the case may be, occurs.
"Eligible Account": A segregated account, which may be an account
maintained with the Trustee, which is maintained with a depository institution
or trust company whose long term unsecured debt obligations are rated at least
A-1 by Fitch, (or, if not rated by Fitch, an equivalent rating from S&P or
Moody's).
"Eligible Investments": Any and all of the following:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America or any agency or instrumentality of
the United States of America 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 of F1+ (or its
equivalent) of Fitch, (or, if not rated by Fitch, an equivalent rating
from S&P or Moody's) and provided that each such investment has an
original maturity of no more than 180 days, and (B) any other demand or
time deposit or deposit which is fully insured by the Federal Deposit
Insurance Corporation;
(iii) 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 Fitch (or, if not
rated by Fitch, an equivalent rating from S&P or Moody's) at the time
of such investment;
(iv) commercial paper having, or demand notes constituting an
investment vehicle in commercial paper having, an original maturity of
less than 180 days and issued by an institution having a short term
unsecured debt rating in the highest available rating category of Fitch
(or, if not rated by Fitch, an equivalent rating from S&P or Moody's)
at the time of such investment (the issuer of any demand notes under
this paragraph (iv) must also be an institution that satisfies the
unsecured debt rating test specified in this paragraph (iv));
(v) a guaranteed investment contract issued by an insurance
company or other corporation having a long term unsecured debt rating
or a claims paying ability rated in the highest available rating
category of Fitch (or, if not rated by Fitch, an equivalent rating from
S&P or Moody's) at the time of such investment; and
(vi) money market funds having ratings in the highest or
second highest available rating category of Fitch (or, if not rated by
Fitch, an equivalent rating from S&P or Moody's) at the time of such
investment which invest only in other Eligible Investments; any such
money market funds which provide for demand withdrawals being
conclusively deemed to satisfy any maturity requirement for Eligible
Investments set forth in this Indenture.
Any Eligible Investments may be purchased by or through the Trustee or any of
its Affiliates.
"Event of Default": The meaning specified in Section 6.01 hereof.
"Final Due Date": With respect to each Receivable, the last Due Date
specified in the related Contract.
"Final Payment Date": With respect to each Series, the date on which
the final principal payment on the Notes of such Series becomes due and payable
as therein or herein provided, whether at the Stated Maturity or by acceleration
or redemption.
"Fitch": Fitch IBCA, Inc. and its successors in interest.
"Grant": To grant, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm. A Grant of the
Receivables, the related Contracts or of any instrument shall include all
rights, powers and options (but none of the obligations) of the Granting party
thereunder, including, without limitation, the immediate and continuing right to
claim, collect, receive and receipt for payments in respect of the Contracts and
the Receivables, or any other payment due thereunder, to give and receive
notices and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring proceedings in the name of the
Granting party or otherwise, and generally to do and receive anything which the
Granting party is or may be entitled to do or receive thereunder or with respect
thereto.
"Guaranty Amounts": Any and all amounts paid by a guarantor, if any,
indicated on the applicable Contract.
"Holder" or "Noteholder": The person in whose name a Note is registered in
the Note Register.
"Indenture" or "this Indenture": This instrument as originally executed
as from time to time supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
as so supplemented or amended. All references in this Indenture to designated
"Articles," "Sections," "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of this
Indenture as originally executed, or if amended or supplemented, as so amended
and supplemented. The words "herein," "hereof," "hereunder" and other words of
similar import, when not related to a specific subdivision of this Indenture,
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
"Independent": When used with respect to any specified Person means
such a Person, who (1) is in fact independent of the Issuer, (2) does not have
any direct financial interest or any material indirect financial interest in the
Issuer or in any Affiliate of the Issuer, (3) is not connected with the Issuer
as an officer, employee, promoter, underwriter, Trustee, partner, director, a
person performing similar functions and (4) is not a brother, sister, spouse,
parent or child of any Person listed in clauses (2) and (3) above. Whenever it
is herein provided that any Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by a Issuer Order and
approved by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Initial Aggregate Collateral Value": The meaning set forth in the related
Series Supplement.
"Initial Payment Date": With respect to the Notes of any Series, the
first Payment Date following the related Series Closing Date, as specified in
such Notes and in the related Series Supplement.
"Institutional Investor": Any original purchaser of a Note, any holder
of a Note holding more than 5% of the aggregate principal amount of the Notes
Outstanding of any Series and any bank, trust company, savings and loan
association or other financial institution, any pension plan, any investment
company, any insurance company, any broker or dealer, or any similar financial
institution or entity, regardless of legal form, or any other Person more than
50% of the ownership interests of which are owned by one or more Persons
previously described in this definition.
"Issuer": TRI Funding II, Inc., a Delaware corporation, until a
successor Person shall have become the Issuer pursuant to the applicable
provisions of this Indenture, and thereafter "Issuer" shall mean such successor
Person.
"Issuer Order" and "Issuer Request": A written order or request signed
in the name of the Issuer by the Chairman of the Board, President, a Vice
President, the Treasurer or Secretary of the Issuer, and delivered to the
Trustee.
"Lien": Any mortgage, deed of trust, pledge, hypothecation, assignment,
participation or equity interest, deposit arrangement, encumbrance, charge, lien
(statutory or other), preferences priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.
"Monthly Servicer's Report": For each Series, the report prepared by the
Servicer pursuant to Section 4.01 of the Servicing Agreement.
"Moody's: Moody's Investors Service, Inc. and its successors in interest.
"Note" or "Notes": Any note or notes authenticated and delivered under this
Indenture and the related Series Supplement.
"Noteholder" or "Holder": The Person in whose name a Note is registered in
the Note Register.
"Note Interest Rate": With respect to the Notes of any Class of any
Series, the rate per annum at which such Notes accrue interest, as specified in
such Notes and the related Series Supplement.
"Note Purchase Agreements": Each of the note purchase agreements, if
any, entered into with respect to the initial issuance of any Class of any
Series of Notes, as specified in the related Series Supplement.
"Note Register" and "Note Registrar": The respective meanings specified in
Section 3.04 hereof.
"Obligor": The borrower under each related Contract, including any
guarantor of such borrower, and their respective successors and assigns.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the President, a Vice President, the Treasurer, the Controller, an
Assistant Controller or the Secretary of the company on whose behalf the
certificate is delivered, and delivered to the Trustee, which certificate shall
comply with the applicable requirements of Section 13.12 hereof. Unless
otherwise specified, any reference in this Indenture to an Officer's Certificate
shall be to an Officer's Certificate of the Issuer.
"Opinion of Counsel": A written opinion of counsel who must be
Independent of the Issuer and its Affiliates and who shall be reasonably
satisfactory to the Trustee and which opinion shall comply with the applicable
requirements of Section 13.12 hereof.
"Outstanding": With respect to the Notes, as of any date of
determination, all Notes theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered to the
Note Registrar for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture,
unless proof satisfactory to the Trustee is presented that any such
Notes are held by a bona fide purchaser;
provided, however, that for purposes of determining whether the Holders of the
requisite principal amount of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Issuer or any other obligor upon such Notes, any Affiliate of the
Issuer or Trendwest shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent, or
waiver, only Notes which the Trustee knows to be so owned shall be so
disregarded.
"Overdue Payment": With respect to a Due Period and a Delinquent
Contract, all payments due in a prior Due Period that the Servicer receives from
or on behalf of an Obligor during the related Due Period on such Delinquent
Contract, including any Servicing Charges.
"Paying Agent": The Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 7.08 hereof and is
authorized by the Issuer pursuant to Section 11.02(o) hereof to pay the
principal of, or interest on, any Notes on behalf of the Issuer.
"Payment Date": With respect to the Notes of any Series, the fifteenth
day of each calendar month (or if such day is not a Business Day, the next
succeeding Business Day) commencing on the Initial Payment Date for such Notes.
"Permitted Institutional Investor" means (a) any original purchaser of
a Note and (b) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any other similar financial institution or
entity, regardless of legal form.
"Person": Any individual, corporation, limited liability company,
partnership, association, joint-stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Placement Agent": SPP Hambro & Co., LLC or its successors in interest.
"Principal Distribution Amount": With respect to any Class of any
Series of Notes, the monthly principal distribution for such Class of such
Series set forth in the related Series Supplement.
"Principal Shortfall Amount": With respect to any Class of any Series
of Notes and any Payment Date, an amount equal to the aggregate amount of
principal payments on such Class that were owed on prior Payment Dates but not
made to the Holders of such Class prior to such Payment Date.
"Principal Terms": The meaning specified in Section 3.01 hereof.
"Prior Issuer": TRI Funding Company I, L.L.C., and its successors in
interest.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase and Substitution Limit": With respect to the Contracts
supporting any Series of Notes, 10% of the Initial Aggregate Collateral Value of
such Series.
"Purchase Price": With respect to any Contract or interest therein
repurchased by the Issuer, TFI or Trendwest, as the case may be, pursuant to
Section 3.03 of the Receivables Purchase Agreement, Section 3.03 of the Sale
Agreement, Section 4.03 hereof or Section 3.10(b) of the Servicing Agreement,
the sum of (i) the Collateral Value of related Receivable on the Calculation
Date on or immediately succeeding the date when the Receivable is repurchased
and (ii) any interest portion of Scheduled Payments with respect to such
Receivable due on or prior to such Calculation Date but not received through
such Calculation Date.
"Rating Agency": Fitch.
"Receivables": With respect to any Contract, all of, and the right to
receive all of (i) the Scheduled Payments, (ii) any Guaranty Amounts, (iii) any
Residual Proceeds, (iv) any Recoveries and (v) any Servicing Charges.
"Receivables Purchase Agreement": The Receivables Purchase Agreement,
dated as of March 1, 1998, by and among TFI, the Prior Issuer, Trendwest and TW
Holdings, as amended and supplemented from time to time, together with the Asset
Assignment and each Subsequent Asset Assignment, if any, executed in connection
therewith.
"Receivables Transfer Agreement": The Second Amended and Restated
Receivables Transfer Agreement, dated as of June 1, 1997, as amended, among TW
Holdings, as Seller, Bank of America National Trust and Savings Association
d/b/a SeaFirst Bank, as agent for the purchasers named therein, and Trendwest
Resorts, Inc.
"Record Date": The close of business on the last day of the month
preceding the applicable Payment Date, whether or not a Business Day, except
with respect to the Initial Payment Date for the Notes of any Series, the Record
Date shall be the related Series Closing Date.
"Recoveries": For any Due Period occurring during or after the date on
which any Contract becomes a Defaulted Contract and with respect to such
Defaulted Contract, all payments that the Servicer received from or on behalf of
an Obligor during such Due Period in respect of such Defaulted Contract or from
liquidation or reselling the related Credits (including purchases by Trendwest
pursuant to Section 3.10(e) of the Servicing Agreement), including but not
limited to Scheduled Payments, Overdue Payments and Guaranty Amounts, as reduced
by any reasonably incurred out-of-pocket expenses incurred by the Servicer in
enforcing such Defaulted Contract.
"Redemption Date": With respect to any Note, a date fixed pursuant to
Section 10.01 hereof.
"Redemption Price": With respect to any Note, and as of any Redemption
Date, the Outstanding principal amount of such Note, together with interest
accrued thereon through the Redemption Date at the related Note Interest Rate
(exclusive of installments of interest and principal maturing on or prior to the
related Redemption Date, payment of which shall have been made or duly provided
for to the Holder of such Note on the applicable Record Date or as otherwise
provided in this Indenture).
"Redemption Record Date": With respect to any redemption of any Note, a
date fixed pursuant to Section 10.01 hereof.
"Registered Holder": The Person whose name appears on the Note Register
on the applicable Record Date or Redemption Record Date.
"Reinvestment Income": With respect to any Series, any interest or
other earnings earned on all or part of the related Series Trust Estate.
"Remittance Date": The Business Day immediately preceding each Payment
Date.
"Reserve Account": With respect to each Series, the trust account created
and maintained pursuant to Section 12.03 hereof.
"Reserve Account Required Balance": With respect to any Series, the meaning
set forth in the related Series Supplement.
"Residual Proceeds": With respect to a Contract that is not a Defaulted
Contract and the related Credits, the net proceeds of any resale or other
disposition of such Credits.
"Responsible Officer": When used with respect to the Trustee, any
officer assigned to the Asset Backed Securities Trust Services Department (or
any successor thereto), including any Vice President, Assistant Vice President,
Trust Officer, Assistant Secretary or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having direct responsibility for the administration of
this Indenture, and also, with respect to a particular matter, any other officer
to whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"Restricted Investor" means (a) any investment company or pension plan
(other than a pension plan held or managed by an insurance company) that,
directly or indirectly through any subsidiary or through any parent corporation
is engaged in the vacation time share business and (b) any other Person that is
not a Permitted Institutional Investor that, directly or indirectly through any
subsidiary or through any parent corporation is engaged in the vacation time
share business.
"S&P": Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.,
and its successors in interest.
"Sale": The meaning specified in Section 6.18 hereof.
"Sale Agreement": The Purchase and Sale Agreement, dated as of March 1,
1998, by and among TFI, Trendwest and the Issuer, as amended and supplemented
from time to time, together with the Assignment and each Subsequent Assignment,
if any, executed in connection therewith.
"Scheduled Payment": With respect to a Payment Date and a Contract, the
periodic payment set forth in such Contract due from the Obligor in the related
Due Period. Scheduled Payments shall not include any membership dues or other
housekeeping payments relating to the use of the Club.
"Series": Any series of Notes established pursuant to a Series Supplement.
"Series Closing Date": With respect to any Series, the date of the initial
issuance of the Notes of such Series.
"Series Collateral": The meaning specified in the Granting Clause of this
Indenture.
"Series Contract Schedule": With respect to any Series, the listing of
Contracts and Receivables on Schedule A to the related Series Supplement, as
amended from time to time pursuant to Section 4.03, which shall include with
respect to each Contract listed on such schedule: (a) a number identifying such
Contract, (b) the Collateral Value of the related Receivable as of the date of
execution and as of the Series Cut-Off Date, (c) the Obligor, (d) the date
entered into, (e) the original term and the number of payments made as of the
Series Cut-Off Date, (f) the Scheduled Payment, (g) the interest rate and (h)
the number of Credits financed, as such schedule may be amended upon any
purchase or substitution of Contracts made in accordance with the terms of the
Transaction Documents.
"Series Cut-Off Date": With respect to the Contracts identified on any
Series Contract Schedule, the cut-off date specified in the related Series
Supplement, and, with respect to any Substitute Contract or Upgrade Contract,
the date on which such Contract is pledged to the Trustee by the Issuer.
"Series Supplement": With respect to any Series, an indenture
supplemental to this Indenture establishing such Series of Notes, executed and
delivered pursuant to Section 4.01 hereof, and all amendments thereof and
supplements thereto.
"Series Trust Estate": The meaning specified in the Granting Clause of this
Indenture.
"Servicer": With respect to each Series, Trendwest Resorts, Inc., an
Oregon corporation, and any successor Servicer appointed pursuant to Section
6.02 of the Servicing Agreement.
"Servicer Fee": With respect to each Series, on each Payment Date, an
amount equal to the product of (i) one-twelfth of 1.75% and (ii) the sum of the
Aggregate Collateral Values of such Series of Notes Outstanding on the preceding
Payment Date, after distributions made on such date.
"Servicing Agreement": The Servicing Agreement, dated as of March 1,
1998, by and among the Issuer, the Servicer, the Subservicer and the Trustee, as
amended or supplemented from time to time.
"Servicing Charges": The sum of (i) all late payment charges paid by
Obligors on Delinquent Contracts after payment in full of any Scheduled Payments
due in a prior Due Period and Scheduled Payments for the related Due Period and
(ii) any other incidental charges or fees received from an Obligor, including,
but not limited to, late fees, collection fees and bounced check charges.
"Servicing Officers": The meaning set forth in the Servicing Agreement.
"State": Any state of the United States of America and, in addition, the
District of Columbia and Puerto Rico.
"Stated Maturity": With respect to the Notes of any Series, the date
specified in such Notes and the related Series Supplement as the "Stated
Maturity."
"Subordinated Note": With respect to any Series, the subordinated note
dated as of the related Series Closing Date, made by the Issuer to TFI as a part
of the consideration for the Purchased Assets related to such Series and the
payments of which are subordinated as set forth in the related Series
Supplement. The form of the Subordinated Note is attached to the Sale Agreement
as Exhibit D.
"Subsequent Assignment": The meaning specified in the Sale Agreement.
"Subservicer": With respect to each Series, Sage Systems, Inc. and its
permitted successors and assigns. This Indenture has been drafted assuming that
at all times one Person shall serve as Subservicer for all Series Outstanding.
"Substitute Contract": The meaning specified in the Sale Agreement.
"Substitute Receivable": The meaning specified in the Sale Agreement.
"Substitution Limit": With respect to the Contracts supporting any
Series of Notes, 1.5% of the Initial Aggregate Collateral Value of such Series.
"TFI": Trendwest Funding II, Inc., a Delaware corporation, and its
permitted successors and assigns.
"Transaction Documents": This Indenture, each Series Supplement, the Note
Purchase Agreements, the Servicing Agreement, the Receivables Purchase
Agreement, the Custodian Agreement, the Sale Agreement and the Notes.
"Trendwest": Trendwest Resorts, Inc., an Oregon corporation, and its
permitted successors and assigns.
"Trigger Event": With respect to any Series, the meaning specified in the
related Series Supplement.
"Trustee": With respect to each Series, LaSalle National Bank, until a
successor Person shall have become the Trustee for such Series pursuant to the
applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Person.
"Trustee Fee": With respect to each Series, the fee payable on each
Payment Date to the Trustee in consideration for the Trustee's performance of
its duties with respect to such Series pursuant to this Indenture as Trustee, in
an amount equal to the product of (i) one-twelfth of the Trustee Fee Rate and
(ii) he aggregate principal amount of Notes Outstanding of such Series on the
preceding Payment Date after giving effect to distributions on such date (or, in
the case of the Initial Payment Date, the initial aggregate principal amount of
the Notes of such Series).
"Trustee Fee Rate": 0.04% per annum.
"TW Holdings": TW Holdings, Inc., a Nevada corporation, and its permitted
successors and assigns.
"UCC": The Uniform Commercial Code as it may from time to time be in effect
in the applicable State.
"Upgrade": The prepayment of a Contract and entry into a new contract
by an Obligor, WorldMark and Trendwest, pursuant to which the Obligor purchases
additional Credits in exchange for an increase in the principal balance owed by
the Obligor.
"Upgrade Contract": The new contract entered into by an Obligor,
Trendwest and the Club related to an Upgrade by such Obligor. The Receivable
relating to each Upgrade Contract shall be pledged to the Trustee pursuant to
Section 4.03(g) hereof.
"Vice President": With respect to the Issuer or the Trustee, any vice
president, whether or not designated by a number or a word or words added before
or after the title "vice president."
"WorldMark" or the "Club": WorldMark, the Club, a California nonprofit
mutual benefit corporation, and its successors in interest.
ARTICLE TWO NOTE FORM
Section 2.01 Form. The Notes of each Series, together with the
certificates of authentication, shall be in substantially the forms set forth in
the related Series Supplement, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted by this
Indenture or the related Series Supplement, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed
thereon, as may, consistently herewith, be determined by the officers executing
such Notes, as evidenced by their execution of such Notes.
The definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any manner acceptable to the Trustee and the initial purchasers of the Notes,
all as determined by the officers executing such Notes, as evidenced by their
execution of such Notes.
ARTICLE THREE THE NOTES
Section 3.01 Denomination. The aggregate principal amount of Notes
of all Series which may be authenticated and delivered under this Indenture is
not limited, except as may be otherwise provided in the related Series
Supplement (except for Notes authenticated and delivered upon registration of
transfer or in exchange for or in lieu of, other Notes pursuant to Sections
3.04, 3.05, 3.06 or 9.05 hereof). The Notes shall be issuable only as registered
Notes without coupons in the denominations of at least $100,000; provided,
however, that the foregoing shall not restrict or prevent the transfer in
accordance with Sections 3.04 and 3.05 hereof of any Note with a remaining
balance of less than $100,000.
The Notes may be issued in one or more Series and, within each Series,
in one or more Classes. With respect to the Notes of any Series, there shall be
established in the related Series Supplement prior to the issuance of the Notes
of such Series (collectively, the "Principal Terms"):
(a) the title of the Notes and the Series and the Class or Classes in which
such Notes shall be included;
(b) the limit, if any, upon the aggregate principal amount of the Notes of
such title and the Notes of each Class of such Series which may be authenticated
and delivered under this Indenture (except for Notes of such Series
authenticated and delivered upon registration of transfer or in exchange for or
in lieu of, other Notes of such Series pursuant to Sections 3.04, 3.05, 3.06 or
9.05 hereof);
(c) the Stated Maturity of such Notes;
(d) the Note Interest Rate at which such Notes shall bear interest;
(e) the Series Closing Date and the Initial Payment Date with respect to
such Notes;
(f) any additional covenants of the Issuer relating to such Notes; and
(g) any other terms of such Notes (which terms shall control to the extent
they are inconsistent with the provisions of this Indenture).
Section 3.02 Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of the Issuer by the President, one of the Vice
Presidents or the Treasurer of the Issuer. The signature of these officers on
the Notes must be manual.
Notes bearing the manual signatures of individuals who were at any time the
proper officers of the Issuer shall bind the Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices prior to the
authentication or delivery of such Notes or did not hold offices at the date of
authentication or delivery of such Notes.
Each Note shall bear on its face the appropriate Delivery Date and be dated
as of the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee or by any Authenticating Agent by the manual signature of one of its
authorized officers, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
Section 3.03 Notes as Debt. For all federal, State, local and
foreign tax purposes, all Noteholders shall treat the Notes of each Class of
each Series as debt of the Issuer.
Section 3.04 Registration, Registration of Transfer and Exchange.
(a) The Issuer shall cause to be kept initially at the Corporate Trust Office of
the Trustee a register (the "Note Register"), in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of Notes and the registration of transfers of Notes. LaSalle
National Bank, 135 South LaSalle Street, Suite 1625, Chicago, Illinois 60674,
Attention: Asset Backed Securities, TRI Funding II [specify Series] is hereby
appointed "Note Registrar" for the purpose of registering Notes and transfers of
Notes as herein provided. The Trustee shall have the right to rely conclusively
upon a certificate of the Note Registrar as to the names and addresses of the
holders of the Notes and the principal amounts and numbers of such Notes as
held. Upon request of any Holder, the Trustee shall, to the extent it may
lawfully do so, furnish such Holder with a list of the names and addresses of
all Holders entered on the Note Register indicating the principal amount and
serial number, if any, of each Note held by each Holder.
(b) Only upon surrender for registration of transfer of any Note at
the office or agency of the Issuer to be maintained as provided in Section
11.02(n) hereof and subject to the conditions set forth in Section 3.05 and
Section 3.06 hereof, the Issuer shall execute, and the Trustee or its agent
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations of such
Series and, if applicable, such Class, and of a like aggregate principal amount
and Stated Maturity.
(c) At the option of the Holder, Notes may be exchanged for other
Notes of the same Class and Series of any authorized denominations and of a like
aggregate principal amount and Stated Maturity, only upon surrender of the Notes
to be exchanged at such office or agency, subject to Section 3.06 hereof.
Whenever any Notes are so surrendered for exchange, the Issuer shall execute,
and the Trustee or its agent shall authenticate and deliver, the Notes which the
Noteholder making the exchange is entitled to receive.
(d) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of such transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Issuer or the Note Registrar) be duly
endorsed or be accompanied by a written instrument of transfer in form
reasonably satisfactory to the Issuer and the Note Registrar duly executed, by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 3.04 or 9.05 hereof not involving any registration
of transfer.
Notwithstanding anything else to the contrary contained in this
Indenture, the obligation of the Issuer to pay the principal of and interest on
the Notes of each Series is not a general obligation of the Issuer, but is
limited solely to the amounts available out of the related Series Collateral
pledged to the Trustee under this Indenture.
Section 3.05 Limitation on Transfer and Exchange. The Notes will
not be registered or qualified under the Securities Act of 1933, as amended (the
"1933 Act"), or the securities laws of any State. No transfer of any Note shall
be made unless that transfer is made in a transaction which does not require
registration or qualification under the 1933 Act or under applicable State
securities laws. In the event that a transfer is to be made without registration
or qualification, such Noteholder's prospective transferee shall either (i)
deliver to the Trustee an investment letter substantially in the form set forth
on Exhibit A hereto (the "Investment Letter") or (ii) deliver to the Trustee an
opinion of counsel that the transfer is exempt from the 1933 Act and will not
result in the Issuer being required to register as an "investment company" under
the Investment Company Act of 1940, as amended. Such opinion may be given by an
attorney that is an employee or officer of such transferee. Neither the Issuer
nor the Trustee is obligated to register or qualify the Notes under the 1933 Act
or any other securities law.
Each prospective transferee acquiring a Note and each prospective owner
of a beneficial interest in a Note acquiring such beneficial interest (the
prospective transferee and the prospective owner of a beneficial interest,
collectively, the "Prospective Owner") shall represent and warrant, in writing,
to the Issuer, TFI, the Servicer, the Trustee and any of their successors that
(A) the Prospective Owner (1) is not an "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or a "plan" within the meaning of Section 4975(e)(1) of
the Code (each a "Plan") and (2) is not acquiring (or considered to be
acquiring) the Note with the assets of any entity whose underlying assets
include the assets of a Plan by reason of such a Plan's investment in such
entity, or (B) the Prospective Owner is an insurance company that is acquiring
the Note for its own account, with its general corporate assets and not with the
assets of a "separate account" within the meaning of Section 3(17) of ERISA and
the conditions of Prohibited Transaction Class Exemption 83-1 and/or Class
Exemption 95-60 have been satisfied by such Prospective Owner, or (C) the
Prospective Owner is an insurance company that is acquiring the Note with the
assets of a separate account within the meaning of Section 3(17) of ERISA and
the conditions of Prohibited Transaction Class Exemption 90-1 have been
satisfied by such Prospective Owner, or (D) the Prospective Owner is a bank
collective investment fund and the conditions of Prohibited Transaction Class
Exemption 91-38 have been satisfied by such Prospective Owner.
The Trustee shall have no liability to any Series Trust Estate or any
Noteholder arising from a transfer of any such Note in reliance upon a
certification or opinion described in this Section 3.05.
Each Holder, by acceptance of any Note, agrees that such Holder will
not offer, sell or transfer any Note to a Restricted Investor. Notwithstanding
the foregoing restrictions on the offer, transfer or sale of the Notes, any
Noteholder may offer, sell or transfer any of its Notes to any Permitted
Institutional Investor (other than a Restricted Investor) holding securities in
a Competitor as part of its investment portfolio. In determining whether a
transferee is a Restricted Investor, a Noteholder shall be entitled to rely on a
certificate to that effect executed by an authorized officer of such Person.
Section 3.06 Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Note Registrar, or the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such destruction, loss, theft
or mutilation), and (ii) there is delivered to the Trustee such security or
indemnity as may be required by the Trustee to save the Issuer and the Trustee
or any agent of any of them harmless, then, in the absence of notice to the
Issuer or the Note Registrar that such Note has been acquired by a bona fide
purchaser, the Issuer shall execute and, upon its request, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a new Note of the same tenor, initial principal
amount, Series, Class and Stated Maturity, bearing a number not
contemporaneously outstanding. If the Holder of such Note is, or is a nominee
for, an original purchaser of the Notes or another Holder with a minimum net
worth of at least $50,000,000, such Person's own unsecured agreement of
indemnity shall be deemed to be satisfactory for the purposes of clause (ii)
above. If after the delivery of such new Note, a bona fide purchaser of the
original Note in lieu of which such new Note was issued presents for payment
such original Note, the Issuer and the Trustee shall be entitled to recover such
new Note from the person to whom it was delivered or any person taking
therefrom, except a bona fide purchaser, and shall be entitled to recover upon
the security or indemnity provided therefor to the extent of any loss, damage,
cost or expenses incurred by the Issuer or the Trustee or any agent of any of
them in connection therewith. If any such mutilated, destroyed, lost or stolen
Note shall have become or shall be about to become due and payable, or shall
have become subject to redemption in full, instead of issuing a new Note, the
Issuer may pay such Note without surrender thereof, except that any mutilated
Note shall be surrendered.
Upon the issuance of any new Note under this Section 3.06, the Issuer
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section 3.06, in lieu of any
destroyed, lost or stolen Note, shall constitute an original additional
contractual obligation of the Issuer, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes of the same Class and Series duly issued hereunder.
The provisions of this Section 3.06 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 3.07 Payment of Principal and Interest; Principal and
Interest Rights Preserved. (a) The Notes of each Class of each Series shall bear
interest on the unpaid principal amount thereof from and including the related
Series Closing Date at the applicable Note Interest Rate (calculated on the
basis of a 360-day year consisting of 12 months of 30 days each) through the day
immediately preceding the Initial Payment Date for such Series and thereafter,
monthly from and including the most recent Payment Date through the day
immediately preceding the applicable Payment Date and (to the extent that the
payment of such interest shall be legally enforceable) on any overdue
installment of principal or interest from the date such principal or interest
became due and payable until fully paid. Interest shall be due and payable in
arrears on each Payment Date, with each payment of interest calculated as
described above on the unpaid principal amount of the Outstanding Notes of each
Class of each Series on the day immediately preceding such Payment Date or, with
respect to interest payable on the Initial Payment Date for such Series, on the
principal amount of the Outstanding Notes on the related Series Closing Date;
provided, however, that in making any interest payment, if the interest
calculation with respect to any Note shall result in a portion of such payment
being less than $.01, then such payment shall be decreased to the nearest whole
cent, and no subsequent adjustment shall be made in respect thereof.
(b) The principal of each Note shall be payable in installments
ending no later than the Stated Maturity thereof unless such Note becomes due
and payable at an earlier date by declaration of acceleration or automatic
acceleration, call for redemption or otherwise. All reductions in the principal
amount of any Note effected by payments of installments of principal made on any
Payment Date shall be binding upon all future Holders of such Note, and of any
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, whether or not such payment is noted on such Note. Each
installment of principal payable on the Notes of each Class of each Series shall
be in an amount equal to the Principal Distribution Amount applicable to such
Class. The principal payable on the Notes of each Series shall be paid on each
Payment Date beginning on the Initial Payment Date for such Series and ending on
the Final Payment Date for such Series on a pro rata basis based upon the face
amount of each Note of each Class of such Series; provided, however, that if as
a result of such proration a portion of such principal would be less than $.01,
then such payment shall be decreased to the nearest whole cent, and such portion
shall be applied to the next succeeding principal payment.
(c) The principal of and interest on the Notes are payable by check
mailed by first-class mail to the Person whose name appears as the Registered
Holder of such Note on the Note Register at the address of such Person as it
appears on the Note Register or, if requested by such Registered Holder, by wire
transfer in immediately available funds to the account specified in writing to
the Trustee by such Registered Holder at least five Business Days prior to the
Record Date for the Payment Date on which wire transfers will commence, in such
coin or currency of the United States of America as at the time of payment is
legal tender for the payment of public and private debts; provided, however,
that the Trustee shall, unless and until otherwise instructed by such
Noteholder, pay each initial Noteholder via wire transfer in immediately
available funds to the accounts specified, if any, in the related Note Purchase
Agreement. All payments on the Notes shall be paid without any requirement of
presentment. The Issuer shall notify the Trustee at the close of business on the
Record Date next preceding the Payment Date on which the Issuer expects that the
final installment of principal of such Note will be paid that the Issuer expects
that such final installment will be paid on such Payment Date. Notice of final
payment on any Note shall be mailed by the Trustee to the Holder of such Note in
accordance with Section 12.04(a) hereof. Funds representing any such checks
returned undeliverable shall be held in accordance with Section 11.02(o). Upon
payment in full of all amounts owed to the Noteholders under the Notes, the
Notes shall be void and the Noteholders shall use reasonable efforts to return
their Notes to the Trustee at the Corporate Trust Office for cancellation upon
written request of the Trustee or the Issuer. In the event a Noteholder cannot
return its Note to the Trustee within 60 days following payment in full of the
Note, it shall send the Trustee an affidavit certifying such loss upon request.
Section 3.08 Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee and any agent of
the Issuer or the Trustee shall treat the Person in whose name any Note is
registered as the owner of such Note for the purpose of receiving payments of
principal of and interest on such Note and for all other purposes whatsoever,
whether or not such Note be overdue, and neither the Issuer, the Trustee nor any
agent of the Issuer or the Trustee shall be affected by notice to the contrary.
Section 3.09 Cancellation. All Notes surrendered to the Trustee for
payment, registration of transfer or exchange (including Notes surrendered to
any Person other than the Trustee which shall be delivered to the Trustee) shall
be promptly canceled by the Trustee. No Notes shall be authenticated in lieu of
or in exchange for any Notes canceled as provided in this Section 3.09, except
as expressly permitted by this Indenture. All canceled Notes held by the Trustee
shall be disposed of by the Trustee as is customary with its standard practice.
ARTICLE FOUR ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF COLLATERAL
Section 4.01 Conditions to Original Issuance of Notes. (a) The
Issuer may from time to time direct the Trustee to authenticate one or more new
Series of Notes, with or without Classes within such Series. The Notes of each
Series shall be payable only out of the Series Trust Estate with respect to such
Series and in accordance with the Transaction Documents. The Receivables and any
collections relating thereto that the Issuer pledged to the Trustee in
connection with the issuance of a Series shall not be available to pay amounts
owed under the Notes of any other Series unless the Trustee has specifically
released a Receivable from the Lien created by this Indenture and the Issuer
subsequently pledges such Receivable to the Trustee in support of another
Series.
(b) The Trustee shall, upon receipt of an Issuer Order and upon the
satisfaction of the conditions set forth below, authenticate and deliver the
Notes of a Series on the related Series Closing Date. The Outstanding Notes of
each Class of each Series shall be equally and ratably entitled, with all other
Notes of such Class as provided herein, to the benefits of this Indenture
without preference, priority or distinction, all in accordance with the terms
and provisions of this Indenture and the related Series Supplement.
(c) On or before the Series Closing Date relating to any new Series,
the parties hereto will execute and deliver a Series Supplement which shall
specify the Principal Terms of such new Series. The terms of such Series
Supplement may modify or amend the terms of this Indenture solely as applied to
such new Series. The obligation of the Trustee to authenticate, execute and
deliver the Notes of each Series and to execute and deliver the related Series
Supplement is subject to the satisfaction of the following conditions:
(i) the Issuer shall have executed the Notes to be
authenticated and delivered on the related Series Closing Date and
shall have delivered such Notes to the Trustee on or prior to the
related Series Closing Date;
(ii) the Issuer shall have delivered to the Custodian on or
prior to the related Series Closing Date the original executed
counterpart of each Contract (and the rest of the contents of the
related Custodian File) identified in the related Series Contract
Schedule on such Series Closing Date, and the Trustee shall have
received a receipt from the Custodian evidencing such delivery;
(iii) the Issuer and the Servicer shall have delivered to the
Trustee on or prior to the related Series Closing Date an Officer's
Certificate dated as of such Series Closing Date of each of the Issuer
and the Servicer, stating, as applicable, that (A) such Person is not
in Default under this Indenture or the Servicing Agreement and that the
issuance of the Notes of such Series will not result in any breach of
any of the terms, conditions or provisions of, or constitute a default
under, such Person's certificate of incorporation, by-laws or other
organizational documents, as applicable, or any material indenture,
mortgage, deed of trust or other agreement or instrument to which such
Person is a party or by which it is bound, or any order of any court or
administrative agency entered in any proceeding to which such Person is
a party or by which it may be bound or to which it may be subject; and
(B) that all conditions precedent provided in this Indenture relating
to the authentication and delivery of the Notes of such Series have
been complied with;
(iv) each of the Issuer, TFI, the Custodian and the Servicer
shall have delivered to the Trustee on or prior to the related Series
Closing Date a Board Resolution of its board of directors authorizing,
as applicable, the execution, delivery and performance of this
Indenture, the related Series Supplement and the other Transaction
Documents and the transactions contemplated hereby and thereby,
certified by an officer of the Issuer, TFI, the Custodian or the
Servicer, as applicable;
(v) each of the Issuer, TFI, the Custodian and the Servicer
shall have delivered to the Trustee on or prior to the related Series
Closing Date a copy of an officially certified document, dated not more
than 30 days prior to such Series Closing Date, evidencing its due
organization and good standing;
(vi) each of the Issuer, TFI, the Custodian and the Servicer
shall have delivered to the Trustee on or prior to the related Series
Closing Date copies of its charter and by-laws certified by its
Secretary or an Assistant Secretary;
(vii) the Issuer shall have delivered, or cause to be
delivered, to the Trustee, on or prior to the related Series Closing
Date, evidence of filing (a) with the Secretary of State of the State
of the Issuer's chief executive office, UCC-1 financing statements
executed by the Issuer, as debtor, and naming the Trustee for the
benefit of the Noteholders of such Series as secured party, and the
Series Trust Estate of such Series as collateral; and (b) with the
Secretary of State of the States in which the chief executive office of
each of Trendwest, TW Holdings and TFI and is located, UCC-1 financing
statements executed by the applicable transferor as debtor and naming
the applicable transferee as secured party and naming as collateral the
collateral transferred by each transferor;
(viii) the Servicer shall have delivered to the Trustee on or
prior to the related Series Closing Date a certificate listing the
Servicing Officers of the Servicer as of such Series Closing Date and
setting forth specimen signatures of such Servicing Officers;
(ix) the Issuer shall have delivered to the Trustee on or
prior to the related Series Closing Date an executed copy of the
Servicing Agreement, the Receivables Purchase Agreement and the Sale
Agreement and all amendments and supplements thereto;
(x) TFI shall have delivered to the Trustee on or prior to
the related Series Closing Date an executed copy of the Receivables
Purchase Agreement and the Sale Agreement and all amendments and
supplements thereto;
(xi) the Custodian shall have delivered to the Trustee on or
prior to the related Series Closing Date an Officer's Certificate dated
as of such Series Closing Date stating that (A) the execution, delivery
and performance of the Custodian Agreement will not result in a breach
of any of the terms, conditions, provisions of, or constitute a default
under, the Custodian's certificate of incorporation or by-laws or any
material indenture, mortgage, deed of trust or other agreement or
instrument to which such Person is a party or by which it is bound, or
any order of any court or administrative agency entered into in any
proceeding to which the Custodian is a party or by which it may be
bound or to which it may be subject;
(xii) the Rating Agency shall have delivered written
confirmation that, with respect to each existing rated Class of each
Series Outstanding, the issuance of Notes on such Series Closing Date
will not result in a downgrade or withdrawal of such existing Classes
or Series of Notes; and
(xiii) the senior Class of the Notes issued on such Series
Closing Date must constitute more than 50% of the aggregate principal
balance of Notes of such Series and must be rated at least investment
grade by the Rating Agency.
The Issuer shall deliver the written confirmation specified in clause (xii)
above and the letter of the Rating Agency contemplated in clause (xiii) above to
the Noteholders of each Series Outstanding prior to such Series Closing Date
promptly upon receipt of such documents.
Section 4.02 Security for Notes. (a) Filing. The Issuer shall file
UCC-1 financing statements described in Section 4.01(c)(vii) hereof in
accordance with such Section 4.01(c)(vii). From time to time, the Servicer shall
take or cause to be taken such actions and execute such documents as are
necessary or deemed by the Trustee to be appropriate to perfect the Trustee's
interests in the Receivables and protect the Trustee's interest in the related
Contracts and Credits against all other Persons, including, without limitation,
the filing of financing statements, amendments thereto and continuation
statements, the execution of transfer instruments and the making of notations on
or taking possession of all records or documents of title.
(b) Name Change or Relocation. If any change in the Issuer's name,
identity, structure or the location of its principal place of business or chief
executive office occurs, then the Issuer shall deliver 30 days' prior written
notice of such change or relocation to the Servicer, the Trustee, the Rating
Agency and the Noteholders and no later than the effective date of such change
or relocation, the Servicer shall file such amendments or statements as may be
required to preserve and protect the Trustee's interests in each Series Trust
Estate.
(c) Chief Executive Office. During the term of this Indenture, the Issuer
will maintain its chief executive office and principal place of business in one
of the States of the United States.
(d) Costs and Expense. The Servicer agrees to pay all reasonable
costs and disbursements in connection with the perfection and the maintenance of
perfection, as against all third parties, of the Trustee's right, title and
interest in and to each Series Trust Estate.
Section 4.03 Substitution and Purchase of Receivables; Upgrade
Contracts. (a) If at any time the Issuer or the Trustee obtains knowledge
(within the meaning of 7.01(e) hereof), discovers or is notified by the Servicer
that any of the representations and warranties of Trendwest or TFI in the Sale
Agreement or Trendwest, the Prior Issuer or TW Holdings in the Receivables
Purchase Agreement were incorrect at the time as of which such representations
and warranties were made, then the Person discovering such defect, omission, or
circumstance shall promptly notify the other parties to this Indenture, the
Noteholders and Trendwest.
(b) In the event any representation or warranty of Trendwest or TFI
in the Sale Agreement or Trendwest, the Prior Issuer or TW Holdings in the
Receivables Purchase Agreement is incorrect and materially and adversely affects
the value of a Contract, the related Receivable or the related Credits, or the
interests of the Holders of the Notes, or in the event of any breach of any of
the representations and warranties set forth in Sections 3.01(a)(v),
3.01(a)(vi), 3.01(a)(vii), 3.01(a)(xiii), 3.01(a)(xiv), 3.01(a)(xvi),
3.01(a)(xxii) or 3.01(a)(xxiii) of each of the Sale Agreement or the Receivables
Purchase Agreement, then the Issuer shall require TFI or Trendwest, pursuant to
the Sale Agreement or the Receivables Purchase Agreement, as applicable, to
eliminate or otherwise cure the circumstance or condition which has caused such
representation or warranty to be incorrect within 30 days of discovery or notice
thereof. If TFI or Trendwest fails or is unable to cure such circumstance or
condition in accordance with the Sale Agreement or the Receivables Purchase
Agreement, as applicable, then the Issuer shall require TFI or Trendwest to
substitute or purchase pursuant to the Sale Agreement or the Receivables
Purchase Agreement, as applicable, any Receivable related to any Contract as to
which such representation or warranty is incorrect within the time specified in
Section 3.03 of the Sale Agreement or the Receivables Purchase Agreement. The
Servicer shall remit the proceeds of a purchase to the Subservicer for deposit
into the Clearing Account upon receipt of such amounts by the Servicer pursuant
to Section 3.03 of the Sale Agreement or Section 3.03 of the Receivables
Purchase Agreement, as applicable.
(c) If the Issuer fails to enforce the purchase or substitution
obligation of TFI or Trendwest under the Sale Agreement or the Receivables
Purchase Agreement, the Trustee is hereby appointed attorney-in-fact to act on
behalf of and in the name of the Issuer to require such purchase or
substitution.
(d) With respect to any Defaulted Contract or Delinquent Contract,
the Issuer shall be entitled to purchase the Receivable related to such Contract
or to deliver a Substitute Receivable meeting the same requirements as those
specified in Section 3.04 of each of the Sale Agreement or the Receivables
Purchase Agreement for substitutions and purchases by TFI or Trendwest upon
breaches of a representation or warranty by TFI, Trendwest, the Prior Issuer or
TW Holdings thereunder; provided, however, that the cumulative Collateral Value
of Defaulted Contracts and Delinquent Contracts which are purchased or
substituted by the Issuer with respect to the Receivables supporting any Series
of Notes (measured as of the date of substitution) shall not exceed the Purchase
and Substitution Limit; provided, further, that the aggregate Collateral Value
of all Substitute Receivables with respect to any Series in any calendar year
cannot exceed the Substitution Limit.
(e) The Issuer shall provide to the Trustee, or with respect to item
(ii) below the Custodian, on the date of delivery of any Substitute Contract the
items listed in (i) and (ii) below.
(i) a supplement to the Sale Agreement substantially in the
form of Annex A to the Sale Agreement and Exhibit B hereto, subjecting
such Substitute Contract to the provisions thereof and hereof, amending
the Series Contract Schedule for the applicable Series and providing
with respect to such Substitute Contract the information set forth in
the Contract Schedule; and
(ii) the original executed counterpart of the Contract and the Custodian
File relating to such Substitute Contract.
(f) If a Contract becomes a Defaulted Contract, the Issuer may
purchase such Contract by paying to the Trustee out of the amount paid to the
Issuer pursuant to Section 5.01 of the applicable Series Supplement the Purchase
Price for such Defaulted Contract; provided, however, the Issuer cannot purchase
a Defaulted Contract if the Collateral Value of all such Defaulted Contracts so
purchased would exceed the amount paid to the Issuer pursuant to Section 5.01 of
such Series Supplement; further provided, that the purchases pursuant to this
Section 4.03(f) shall be deemed to be purchases subject to the Purchase and
Substitution Limit as if repurchased pursuant to Section 4.03(b).
(g) If an Obligor desires to enter into an Upgrade Contract and the
Issuer purchases the Receivable relating to such Upgrade Contract from TFI
pursuant to Section 3.04(e) of the Sale Agreement, then the Servicer shall cause
Trendwest to deliver such Upgrade Contract to the Issuer immediately upon
execution by Trendwest, WorldMark and the Obligor, and the Issuer shall pledge
the Receivable relating to such Upgrade Contract to the Trustee immediately upon
such execution by delivering (i) to the Trustee a supplemental grant in the form
of Annex A to the Sale Agreement and Exhibit B hereto, subjecting such Upgrade
Contract and the related Receivable to the provisions thereof and hereof,
amending the Series Contract Schedule for the applicable Series and providing
with respect to such Upgrade Contract the information set forth in the Contract
Schedule and (ii) to the Custodian the original executed counterpart of the
Upgrade Contract and the rest of the contents of the related Custodian File.
Section 4.04 Releases. (a) The Issuer shall be entitled to obtain a
release from the lien of this Indenture for any Contract, the related Receivable
and the related Credits at any time (i) after a payment by TFI or Trendwest of
the Purchase Price of the Receivable, (ii) after a Substitute Contract is
substituted for such Contract, or (iii) upon the purchase of a Contract in
accordance with Section 3.10(b) of the Servicing Agreement, if the Issuer
delivers to the Trustee an Officer's Certificate (A) identifying the Receivable
and the related Contract and the related Credits to be released, (B) requesting
the release thereof, (C) setting forth the amount deposited in the Clearing
Account with respect thereto, in the event a Contract, the related Receivable
and the related Credits are being released from the lien of this Indenture
pursuant to (i) or (iii) above, and (D) certifying that the amount deposited in
the Clearing Account equals (x) the Purchase Price of the Receivable related to
such Contract, in the event a Contract, the related Receivable and the related
Credits are being released from the lien of this Indenture pursuant to (i) above
or (y) the entire amount set forth in Section 3.10(b) of the Servicing Agreement
with respect to such Contract, the related Receivable and related Credits in the
event of a release from the lien of this Indenture pursuant to (iii) above;
provided, however, that upon the termination of a Contract, any residual
proceeds from the related Credits shall be placed in the Clearing Account prior
to the Trustee or the Issuer releasing the related Credits from the security
interest granted to the Trustee by the Issuer pursuant to this Indenture or to
the Issuer by TFI pursuant to the Sale Agreement.
(b) Upon satisfaction of the conditions specified in subsection (a)
above or upon the satisfaction of the conditions in Section 4.03(e) or the
remittance of the Purchase Price by the Issuer pursuant to Section 4.03(d) or
Section 4.03(f) hereof and Section 3.04 of the Sale Agreement with respect to a
Contract, the Trustee shall release from the lien of this Indenture the
Contract, the related Receivable and the related Credits described in the
Issuer's request for release and shall deliver, or instruct the Custodian to
deliver, to or upon the order of the Issuer such Contract and the related
Custodian File.
(c) In connection with the issuance of a new Series of Notes, the
Trustee, without the consent of the Holders of Notes of any Series, shall, upon
Issuer Order, on a Series Closing Date release to the Issuer Receivables (which
shall be specified in such Issuer Order) from the Series Collateral supporting
any existing Series of Notes but only if the following conditions are met (as
certified by the Issuer and the Servicer to the Trustee in writing in a
certificate substantially in the form of Exhibit C hereto): (i) there is
currently no Default, Event of Default, Trigger Event or Cash Accumulation Event
that has occurred and is continuing (nor has any Default, Event of Default or
Cash Accumulation Event existed for a period of 90 consecutive days immediately
preceding such proposed release nor is a Trigger Event Period continuing on the
date of such release) with respect to the Series related to any Receivable that
the Issuer desires to have released from the Lien of the Trustee with respect to
such Series; (ii) with respect to each Series from which Receivables are
proposed to be released, after giving effect to such release, (A) the Aggregate
Collateral Value of such Series (including only Receivables which, on the date
of such release, satisfy all of the representations and warranties set forth in
paragraphs (a) and (b) of Section 3.01 of the Sale Agreement as if such
representations and warranties were made as of the date of such release) must be
greater than or equal to the product of (x) the aggregate principal balance of
all Notes Outstanding of such Series on such date and (y) a fraction the
numerator of which is the Initial Aggregate Collateral Value for such Series and
the denominator of which is the initial aggregate principal balance of the Notes
of such Series as of the Series Closing Date of such Series (the Issuer Order
shall specify the minimum Collateral Value required for each such Series to
satisfy this condition), and (B) the amount in the Reserve Account is equal to
the Reserve Account Required Balance for such Series; (iii) simultaneous with
such release, the Issuer pledges all of such released Receivables to the Trustee
in connection with the issuance of a new Series of Notes in accordance with the
terms of the Transaction Documents and (iv) the Independent Accountants
specified in Section 4.03 of the Servicing Agreement have delivered, at the sole
expense of the Issuer, the agreed-upon procedures letter, in substantially the
form attached as Exhibit A to the Servicing Agreement, to the Trustee, with
respect to such release (which indicates that the Series Trust Estate for such
Series contains the minimum Collateral Value necessary to satisfy clause (ii)(A)
above). If a release occurs prior to the Payment Date in any given month, the
calculations of Aggregate Collateral Value and the principal balance of the
Notes Outstanding for any Series made pursuant to this section 4.04(c) may be
made as of such Payment Date (after giving effect to the distributions made on
such Payment Date) instead of as of the date of the proposed release; provided,
that, the appropriate amounts for such distribution are being held in the
Collection Account or the Distribution Account for each applicable Series;
otherwise, the calculations shall be made as of the immediately preceding
Payment Date. The Issuer shall deliver (1) the certification of the Issuer and
the Servicer and (2) the agreed-upon procedures letter to each Noteholder of
each applicable Series promptly after each such release.
Section 4.05 Trust Estate. When required by the provisions of
Articles Four, Six and Twelve hereof, the Trustee for a Series shall execute
instruments to release property from the lien of this Indenture and the related
Series Supplement, or convey such Trustee's interest in the same, in a manner
and under circumstances which are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by such Trustee as
provided in this Article Four shall be bound to ascertain such Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
Section 4.06 Notice of Release. The Trustee shall be entitled to
receive at least 10 days' notice of any action to be taken pursuant to Section
4.04(a) hereof, accompanied by copies of any instruments involved.
Section 4.07 Opinions as to Trust Estate. (a) On each Series
Closing Date, the Issuer shall furnish to the Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any UCC financing statements and continuation
statements, as are necessary to (x) perfect the transfers from and grants of
security interests by, (i) Trendwest, the Prior Issuer and TW Holdings to TFI
and (ii) TFI to the Issuer, and (y) perfect and make effective the first
priority lien and security interest in favor of the Trustee, for the benefit of
the Noteholders of the related Series, created by this Indenture and reciting
the details of such action, or stating that, in the opinion of such counsel, no
such action is necessary to make such lien and security interest effective.
(b) With respect to each Series, on or before each anniversary of the
related Series Closing Date, the Issuer shall furnish to the Trustee (with a
copy to each of the Noteholders) an Opinion of Counsel with respect to each
jurisdiction in which a UCC financing statement has been filed against each of
TFI, the Prior Issuer, Trendwest, TW Holdings and the Issuer with respect to
such Series either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, re-recording and refiling of
this Indenture and the related Series Supplement, any indentures supplemental
hereto and thereto and any other requisite documents and with respect to the
execution and filing of any UCC financing statements and continuation statements
as is necessary to maintain the first priority lien and security interest
created by this Indenture and the Series Supplement with respect to such Series,
and the security interest, if applicable, created by the Sale Agreement or the
Receivables Purchase Agreement with respect to such Series and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain such lien and security interest. Such Opinion of
Counsel shall also describe the recording, filing, re-recording and refiling of
this Indenture, the related Series Supplement, any indentures supplemental
hereto and thereto and any other requisite documents and the execution and
filing of any UCC financing statements and continuation statements that will, in
the opinion of such counsel, be required to maintain the lien and security
interest of this Indenture and the related Series Supplement and the security
interest, if applicable, created by the Sale Agreement or the Receivables
Purchase Agreement with respect to such Series until the next date a
continuation statement must be filed to maintain the Trustee's interest in the
related Series Collateral.
Section 4.08. Classes. This Indenture has been drafted assuming that
each Series will be made up of more than one Class of Notes. If the Issuer
issues a Series that is not comprised of Classes of Notes, the Notes of such
Series shall be deemed to comprise one Class of the Notes for the purposes of
this Indenture.
ARTICLE FIVE SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge of Indenture. (a) Following
payment in full of (i) the Notes of any Series, (ii) the fees and charges of the
Trustee related to such Series and (iii) all other obligations of the Issuer
with respect to such Series under this Indenture and the related Series
Supplement, and the release by the Trustee of the related Series Trust Estate in
accordance with Section 5.01(b) hereof, this Indenture and the related Series
Supplement shall be discharged with respect to such Series.
(b) In connection with the discharge of this Indenture and the
related Series Supplement and the release of the related Series Trust Estate,
the Trustee shall release from the lien of this Indenture and the related Series
Supplement and shall deliver, or instruct the Custodian to deliver, to or upon
the order of the Issuer all property remaining in the related Series Trust
Estate and shall execute and file, at the expense of the Issuer, UCC financing
statements evidencing such discharge and release.
ARTICLE SIX DEFAULTS AND REMEDIES
Section 6.01 Events of Default. "Event of Default" wherever used herein
means any one of the following events:
(1) default in the payment of any interest upon any Note of a Series within
one Business Day after the same becomes due and payable; or
(2) default in the payment of any principal of any Note of a Series within
one Business Day after the same becomes due and payable; or
(3) default in the observance or performance of any covenant or agreement
of the Issuer made in this Indenture, any Series Supplement, the Note Purchase
Agreements, the Sale Agreement, the Custodian Agreement or the Servicing
Agreement (other than a covenant or warranty default, the observance or
performance of which is elsewhere in this Section 6.01 specifically dealt with),
or any representation or warranty of the Issuer made in this Indenture, any
Series Supplement, the Note Purchase Agreements, the Sale Agreement, the
Custodian Agreement, the Servicing Agreement or in any certificate or other
writing delivered pursuant hereto or thereto or in connection herewith or
therewith proving to have been incorrect in any material respect as of the time
when the same shall have been made and such default shall continue or not be
cured, or the circumstance or condition in respect of which such representation
or warranty was incorrect shall not have been eliminated or otherwise cured, for
a period of 30 days (except for defaults relating to Sections 4.03 and 11.02(a),
(b), (i), (j), (l), (q) and (s) hereof, which shall have no grace period) from
the earlier of the Issuer obtaining actual knowledge of, or receiving from the
Trustee or any Holder notice of, such default or incorrect representation or
warranty; or
(4) the Issuer becomes subject to registration as an "investment company"
under the Investment Company Act of 1940, as amended; or
(5) the filing of a petition or the entry of a decree or order for relief
by a court having jurisdiction in the premises in respect of the Issuer under
the Federal Bankruptcy Code or any other applicable federal or State bankruptcy,
insolvency, reorganization, liquidation or other similar law now or hereafter in
effect or any arrangement with creditors or appointing a receiver, liquidator,
assignee, trustee, or sequestrator (or other similar official) for the Issuer or
for any substantial part of its property in an involuntary case, or ordering the
winding up or liquidation of the Issuer's affairs, and the continuance of any
such petition undismissed or of any such decree or order unstayed and in effect
for a period of 60 consecutive days; or
(6) the institution by the Issuer of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by the Issuer to the institution of
bankruptcy or insolvency proceedings against the Issuer, or the filing by the
Issuer of a petition or answer or consent seeking reorganization or relief under
the Federal Bankruptcy Code or any other applicable federal or State bankruptcy,
insolvency, reorganization, liquidation or other similar law now or hereafter in
effect, or the consent by the Issuer to the filing of any such petition or to
the appointment of or possession by a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or other similar official) of the Issuer or of any
substantial part of the Issuer's property, or the making by the Issuer of any
assignment for the benefit of creditors, or the admission by either in writing
of its inability, or the failure by it generally, to pay its debts as they
become due, or the taking of corporate action by the Issuer in furtherance of
any such action; or
(7) (i) the impairment of the validity of any security interest of the
Trustee in the Trust Estate, except as expressly permitted, or (ii) creation of
any encumbrance not otherwise permitted which is not stayed or released within
10 days of the Issuer having knowledge of its creation; or
(8) a default in the observance or performance by both TFI and Trendwest of
their repurchase obligations pursuant to Section 3.03 of the Sale Agreement or
by Trendwest of its repurchase obligations under Section 3.03 of the Receivable
Purchase Agreement;
provided, however, that to the extent that the occurrence of the events in
clauses (3), (7) or (8) above do not affect the rights of the Holders of all
Series of Notes, then such events shall be an Event of Default only with respect
to the Series so affected; provided, further, that the occurrence of the events
in clauses (1) and (2) above shall only be an Event of Default with respect to
the Series so affected.
Section 6.02 Acceleration of Maturity; Rescission and Annulment. If
an Event of Default with respect to the Notes of any Series at the time
Outstanding occurs and is continuing, then Holders of not less than 66-2/3% in
aggregate principal amount of the Controlling Class of the Notes Outstanding of
such Series may declare, by notice in writing to the Trustee and the Issuer, or
may direct the Trustee to declare, by notice in writing to the Issuer, the
principal of all the Notes of such Series to be immediately due and payable, and
upon any such declaration, such principal shall become immediately due and
payable without any presentment, demand, protest or other notice of any kind
(except such notices as shall be expressly required by the provisions of this
Indenture), all of which are hereby expressly waived; provided, however, that if
an Event of Default under paragraph (5) or (6) of Section 6.01 hereof occurs
with respect to the Issuer, the Notes of all Series shall automatically become
due and payable without any declaration notice to the Issuer or the Trustee. The
Trustee shall send a copy of any such notice to the Rating Agency.
At any time after such a declaration of acceleration has been made, or
after such acceleration has automatically become effective, with respect to any
Series of Notes but before any Sale of the related Series Trust Estate has been
made or a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of not less
than 66-2/3% in aggregate principal amount of the Controlling Class of Notes
Outstanding of such Series, by written notice to the Issuer and the Trustee, may
rescind and annul such declaration or automatic acceleration and its
consequences (except that in the case of a payment default on the Notes of any
Series, the consent of not less than 66-2/3% in aggregate principal amount of
the Controlling Class of Notes Outstanding of such Series shall be required to
rescind and annul such declaration or automatic acceleration and its
consequences) if:
(1) the Issuer has paid or deposited with the Trustee a sum sufficient to
pay
(A) all overdue installments of interest on all Notes of such Series,
(B) the principal of any Notes of such Series which
has become due otherwise than by such declaration of
acceleration or automatic acceleration and interest thereon at
the rate borne by such Notes from the time such principal
first became due until the date when paid, and
(C) all sums paid or advanced, together with
interest thereon, by the Trustee or any Holder of the Notes of
such Series hereunder and the reasonable compensation,
expenses, disbursements and advances of the Trustee and such
Noteholders, their agents and counsel incurred in connection
with the enforcement of this Indenture to the date of such
payment or deposit; and
(2) all Events of Default, other than the nonpayment of the
principal of the Notes which have become due solely by such declaration
of acceleration or by automatic acceleration, have been cured or waived
as provided in Section 6.15 hereof.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
Section 6.03 Collection of Indebtedness and Suits for Enforcement
by Trustee. The Issuer covenants that if an Event of Default shall occur and be
continuing with respect to any Series of Notes and such Notes have been
declared, or automatically become, due and payable and such declaration or
automatic acceleration has not been rescinded and annulled, the Issuer will,
upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders
of such Notes, the whole amount then due and payable on such Notes for principal
and interest, with interest upon the overdue principal and overdue interest at
the applicable Note Interest Rate and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Issuer fails to pay such amount forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust may, institute
Proceedings for the collection of the sums so due and unpaid, and prosecute such
Proceeding to judgment or final decree, and enforce the same against the Issuer
and collect the monies adjudged or decreed to be payable in the manner provided
by law out of the property of the Issuer, wherever situated.
If an Event of Default occurs and is continuing with respect to the
Notes of any Series, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of such Notes by such
appropriate Proceedings as the Trustee shall deem most effectual to protect and
enforce 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 6.04 Remedies. If an Event of Default shall have occurred
and be continuing with respect to the Notes of any Series, the Trustee may do
one or more of the following:
(a) institute Proceedings for the collection of all amounts
then due and payable on such Notes or under this Indenture, whether by
declaration, automatic acceleration or otherwise, enforce any judgment
obtained, and collect from the Issuer the monies adjudged due;
(b) take possession of and sell the related Series Trust
Estate securing such Notes or any portion thereof or rights or interest
therein, at one or more Sales called and conducted in any manner
permitted by law;
(c) institute any Proceedings from time to time for the
complete or partial foreclosure of the lien created by this Indenture
with respect to the related Series Trust Estate securing such Notes;
(d) during the continuance of a default under a Contract, exercise any of
the rights of the lender under such Contract; and
(e) exercise any remedies of a secured party under the UCC or
any applicable law and take any other appropriate action to protect and
enforce the rights and remedies of the Trustee or the Holders of such
Notes hereunder;
provided, however, that without the consent of the Holders of not less than
66-2/3% in principal amount of the Controlling Class of Notes Outstanding of
such Series, the Trustee may not sell or otherwise liquidate any portion of the
related Series Trust Estate unless the proceeds of such Sale or liquidation
distributable to the Holders of the Notes of such Series are sufficient to
discharge in full the amounts then due and unpaid upon such Notes for principal
and interest.
Section 6.05 Optional Preservation of Trust Estate. If (i) an Event
of Default shall have occurred and be continuing with respect to the Notes of
any Series and (ii) no Notes of such Series have been declared, or have
automatically become, due and payable, or such declaration or automatic
acceleration and its consequences have been annulled and rescinded, the Trustee,
upon request from the Holders of a majority in principal amount of the
Controlling Class of the Notes Outstanding of such Series, may elect, by giving
written notice of such election to the Issuer, to take possession of and retain
the portion of the related Series Trust Estate securing such Notes intact,
collect or cause the collection of the proceeds thereof and make and apply all
payments and deposits and maintain all accounts in respect of such Notes in
accordance with the provisions of Article Twelve of this Indenture. If the
Trustee is unable to or is stayed from giving such notice to the Issuer for any
reason whatsoever, such election shall be effective as of the time of such
determination or request, as the case may be, notwithstanding any failure to
give such notice, and the Trustee shall give such notice upon the removal or
cure of such inability or stay (but shall have no obligation to effect such
removal or cure). Any such election may be rescinded with respect to any portion
of the Series Trust Estate securing such Notes remaining at the time of such
rescission by written notice to the Trustee and the Issuer from the Holders of a
majority in principal amount of the Controlling Class of Notes Outstanding of
such Series.
Section 6.06 Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
Proceeding relating to the Issuer or any other obligor upon any of the Notes of
any Series or the property of the Issuer or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of any Notes shall
then be due and payable as therein expressed or by declaration, automatic
acceleration or otherwise and irrespective of whether the Trustee shall have
made any demand on the Issuer for the payment of overdue principal or interest)
shall be entitled and empowered to intervene in such proceeding or otherwise,
(i) to file and prove a claim for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of
the Notes issued hereunder and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and
any other amounts due the Trustee under Section 7.07 hereof) and of the
Noteholders allowed in such judicial Proceeding, and
(ii) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, or sequestrator (or other
similar official) in any such judicial Proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such Proceeding.
Section 6.07 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 the Transaction Documents to
which the Trustee shall be a party), the Trustee shall be held to represent all
of the Noteholders, and it shall not be necessary to make any Noteholder a party
to any such Proceedings.
(b) All rights of actions and claims under the Transaction Documents
or the Notes may be prosecuted and enforced by the Trustee without the
possession of any of the Notes or the production thereof in any Proceeding
relating thereto, and any such Proceedings instituted by the Trustee shall be
brought in its own name as Trustee of an express trust, and any recovery whether
by judgment, settlement or otherwise shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the benefit of the Holders of the Notes
and shall be distributed as set forth in Section 6.08 hereof.
Section 6.08 Application of Money Collected. If the Notes of any
Series have been declared, have automatically become, or otherwise become due
and payable following an Event of Default and such declaration or automatic
acceleration has not been rescinded or annulled, any money collected by the
Trustee with respect to such Notes pursuant to this Article Six or otherwise and
any other money that may be held thereafter by the Trustee as security for such
Notes, including without limitation the amounts in the Reserve Account related
to such Series, shall be applied as set forth, for each Series, in the related
Series Supplement, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal or interest, without
presentation of any Notes of such Series.
Section 6.09 Limitation on Suits. No Holder of any Note of any
Series shall have any right to institute any Proceeding, judicial or otherwise,
with respect to this Indenture or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 66-2/3% in principal amount
of the Outstanding Notes of the applicable Series shall have made
written request to the Trustee to institute Proceedings in respect of
such Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 30 days after its receipt of such notice, request and
offer of security or indemnity has failed to institute any such Proceedings; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 30-day period by the Holders of
not less than 66-2/3% or more in principal amount of the Outstanding
Notes of the applicable Series;
it being understood and intended that no one or more Holders of Notes of any
Class of any Series 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 of such Class or any other Series, or
to obtain or to seek to obtain priority or preference over any other Holders of
Notes of such Class 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
of Notes of such Class.
Section 6.10 Unconditional Right of Noteholders to Receive
Principal and Interest. Notwithstanding any other provision in this Indenture,
the Holders of Notes of each Series shall have the right, which is absolute and
unconditional, to receive payment of the principal, interest, and premium, if
any, on such Note as such principal, interest, and premium, if any, becomes due
and payable and to institute any Proceeding for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Noteholder.
Section 6.11 Restoration of Rights and Remedies. If the Trustee or
any Noteholder has instituted any Proceeding to enforce any right or remedy
under this Indenture and such Proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Trustee or to such
Noteholder, then, and in every case, the Issuer, the Trustee and the Noteholders
shall, subject to any determination in such Proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.
Section 6.12 Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Notes in the last paragraph of Section 3.06 hereof, no right or
remedy herein conferred upon or reserved to the Trustee or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 6.13 Delay or Omission; Not Waiver. No delay or omission of
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or any acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Noteholders, as the case may be.
Section 6.14 Control by Noteholders. The Holders of not less than
66-2/3% in principal amount of the Controlling Class of Notes Outstanding of
each affected Series, 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:
(1) such direction shall not be in conflict with any rule of
law or with this Indenture including, without limitation, any provision
hereof which expressly provides for greater percentage of principal of
Outstanding Notes of a Series;
(2) any direction to the Trustee by the Holders of Notes of a
Series to undertake a private Sale of the portion of the related Series
Trust Estate shall be by the Holders of not less than 66-2/3% in
principal amount of the Controlling Class of Notes Outstanding of such
Series unless the condition set forth in Section 6.18(b)(ii) hereof is
met;
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction; provided,
however, that, subject to Section 7.01 hereof, the Trustee need not
take any action which a Responsible Officer or Officers of the Trustee
in good faith determines might involve it in personal liability or be
unjustly prejudicial to the Noteholders of such Series not consenting;
and
(4) the Trustee has been furnished reasonable indemnity
against costs, expenses and liabilities which it might incur in
connection therewith as provided in Section 7.01(f) hereof; provided,
that the unsecured agreement to indemnify the Trustee by any Holder
(or, in the case of any Note held in nominee name, the principal of
such nominee) that is an Institutional Investor that has a minimum net
worth of at least $50,000,000 shall be deemed to be satisfactory.
Section 6.15 Waiver of Past Defaults. The Holders of not less than
66-2/3% in principal amount of the Controlling Class of Notes Outstanding of a
Series may on behalf of the Holders of all the Notes of such Series waive any
past Default with respect to such Series hereunder and its consequences, except
a Default:
(1) in the payment of the principal of, or premium, if any, or interest on
any Note of such Series, or a Default described in Sections 6.01(5) and (6)
hereof, or
(2) in respect of a covenant or provision hereof which under
Article Nine hereof cannot be modified or amended without the consent
of the Holder of each Outstanding Note affected.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.16 Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee 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; but notwithstanding such assessment, the provisions of this
Section 6.16 shall not apply to any suit instituted by the Trustee, or to any
suit instituted by any Noteholder or group of Noteholders of a Series, holding
in the aggregate more than 50% in principal amount of the Outstanding Notes of
such Series, or to any suit instituted by any Noteholder for the enforcement of
the payment of the principal of or interest on any Note on or after the Stated
Maturity provided that such suit is not deemed to be frivolous under the
applicable rules of civil procedure by such court.
Section 6.17 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 the
Transaction Documents; 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 6.18 Sale of Trust Estate. (a) The power to effect any sale
(a "Sale") of any portion of any Series Trust Estate pursuant to Section 6.04
hereof shall not be exhausted by any one or more Sales as to any portion of such
Series Trust Estate remaining unsold, but shall continue unimpaired until the
entire Series Trust Estate securing such Series shall have been sold or all
amounts payable on the Notes of such Series and under this Indenture with
respect thereto shall have been paid. The Trustee may from time to time postpone
any Sale by public announcement made at the time and place of such Sale.
(b) To the extent permitted by applicable law, the Trustee shall not,
in any private Sale, sell to a third party the Series Trust Estate of any
Series, or any portion thereof unless:
(i) the Holders of not less than 66-2/3% in principal amount
of the Controlling Class of Notes Outstanding of the affected Series,
consent to or direct the Trustee to make such Sale; or
(ii) the proceeds of such Sale would not be less than the sum
of all amounts due to the Trustee hereunder and the entire unpaid
principal amount of the Notes of such Series and interest due or to
become due thereon on the Payment Date next succeeding such Sale.
(c) The Trustee or the Noteholders may bid for and acquire any
portion of a Series Trust Estate in connection with a public Sale thereof, and
in lieu of paying cash therefor, any Noteholder may make settlement for the
purchase price by crediting against amounts owing on the Notes of such Holder or
other amounts owing to such Holder secured by this Indenture, that portion of
the net proceeds of such Sale to which such Holder would be entitled in
accordance with the priorities set forth in Section 6.08 and the related Series
Supplement, after deducting the reasonable costs, charges and expenses incurred
by the Trustee or the Noteholders in connection with such Sale. Such Notes need
not be produced in order to complete any such Sale, or in order for the net
proceeds of such Sale to be credited against such Notes. The Trustee or such
Noteholders may hold, lease, operate, manage or otherwise deal with any property
so acquired in any manner permitted by law.
(d) The Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of any Series Trust
Estate in connection with a Sale thereof. In addition, the Trustee is hereby
irrevocably appointed the agent and attorney-in-fact of the Issuer to transfer
and convey its interest in any portion of such Series Trust Estate in connection
with a Sale thereof, and to take all action necessary to effect such Sale. No
purchaser or transferee at such a sale shall be bound to ascertain the Trustee's
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
(e) The method, manner, time, place and terms of any Sale of all or
any portion of any Series Trust Estate shall be commercially reasonable.
Section 6.19 Action on Notes. The right of a Trustee for a Series
to seek and recover judgment on the Notes of such Series 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 of any
Series 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 related Series Trust Estate or upon any of the assets of the Issuer.
ARTICLE SEVEN THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities. (a) With respect
to each Series of Notes, except during the continuance of an Event of Default
relating to such Series known to the Trustee as provided in subsection (e)
below:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith or negligence on its part,
the Trustee may conclusively rely as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; but in the case of any such certificates or opinions,
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same
and to determine whether or not they conform to the requirements of
this Indenture.
(b) In case an Event of Default relating to a Series known to the
Trustee as provided in subsection (e) below has occurred and is continuing, with
respect to such Series and the related portion of the related Series Trust
Estate, the Trustee shall exercise such of the rights and powers vested in it by
this Indenture, and shall use the same degree of care and skill in its exercise,
as a reasonable person would exercise or use under the circumstances in the
conduct of his or her own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct or bad faith, except that:
(i) this subsection (c) shall not be construed to limit the effect of
subsection (a) of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer of the Trustee, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction the Holders of a majority (or other such percentage
as may be required by the terms hereof) in principal amount of the
Controlling Class of Notes Outstanding of an affected Series in
accordance with Section 6.14 hereof 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, the Sale Agreement or the Servicing Agreement;
and
(iv) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 7.01.
(e) For all purposes under this Indenture, the Trustee shall not be
deemed to have notice or knowledge of any Event of Default described in Section
6.01(4), 6.01(5) or 6.01(6) hereof, any Default described in Section 6.01(3)
hereof or Section 4.03(a) hereof unless a Responsible Officer has actual
knowledge thereof or unless written notice of any event which is in fact such an
Event of Default or Default is received by the Trustee at the Corporate Trust
Office, and such notice references the Notes generally, the Issuer, a Series
Trust Estate or this Indenture.
(f) The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Indenture, or to enter any
appearance or in any way defend in any suit in which it may be made defendant,
or to take any steps in the execution of the trusts hereby created or in the
enforcement of any rights and powers hereunder until it shall be indemnified to
its reasonable satisfaction against any and all costs and expenses, outlays and
counsel fees and other reasonable disbursements and against all liability,
except liability resulting from the Trustee's negligence or willful misconduct
as adjudicated, in connection with any action so taken; provided, that the
unsecured agreement to indemnify the Trustee by any Holder (or, in the case of
any Note held in nominee name, the principal of such nominee) that is an
Institutional Investor that has a minimum net worth of at least $50,000,000
shall be deemed to be satisfactory.
(g) Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to all or a portion of any Series Trust Estate following an
Event of Default and a consequent declaration of acceleration or automatic
acceleration of the maturity of one or more Series of Notes, whether such
extinguishment occurs through a Sale of such Series Trust Estate to another
person, the acquisition of the relevant portion of such Series Trust Estate by
the Trustee with respect to such Series Trust Estate (or the proceeds thereof)
and the Noteholders and the rights of the Noteholders shall continue to be
governed by the terms of this Indenture.
(h) Notwithstanding anything to the contrary contained herein, the
provisions of subsections (e) through (g), inclusive, of this Section 7.01 shall
be subject to the provisions of subsections (a) through (c), inclusive, of this
Section 7.01.
(i) The Trustee shall provide the reports and accountings as required
pursuant to Section 12.04 hereof.
(j) 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, no implied covenant shall be read into
this Indenture and, in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely on the truth of the statements and corrections of
the opinions furnished to the Trustee.
Section 7.02 Notice of Default. Promptly after the occurrence of
any Default known to the Trustee (within the meaning of Section 7.01(e) hereof)
which is continuing, the Trustee shall transmit by mail to the Rating Agency and
all Holders of Notes of each affected Series, as their names and addresses
appear on the Note Register, notice of such Default hereunder known to the
Trustee.
Section 7.03 Certain Rights of Trustee. Except as otherwise provided in
Section 7.01,
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other obligation, paper or document believed by it
to be genuine and to have been signed or presented by the proper party
or parties;
(b) any request or direction of the Issuer mentioned herein
shall be sufficiently evidenced by an Issuer Request or Issuer Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel selected by the Trustee with due care or any
Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Noteholders pursuant to this Indenture,
unless such Noteholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
provided, that the unsecured agreement to indemnify the Trustee by any
Holder (or, in the case of any Note held in nominee name, the principal
of such nominee) that is an Institutional Investor that has a minimum
net worth of at least $50,000,000 shall be deemed to be satisfactory.
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Issuer, upon
reasonable notice and at reasonable times personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney,
appointed with due care by it hereunder.
Section 7.04 Not Responsible for Recitals or Issuance of Notes. (a)
The recitals contained herein and in the Notes, except the certificates of
authentication on the Notes, shall be taken as the statements of the Issuer, and
the Trustee assumes no responsibility for their correctness. The Trustee makes
no representations as to the validity or condition of any Series Trust Estate or
any part thereof, or as to the title of the Issuer thereto or as to the security
afforded thereby or hereby, or as to the validity or genuineness of any
securities at any time pledged and deposited with the Trustee hereunder or as to
the validity or sufficiency of this Indenture or of the Notes. The Trustee shall
not be accountable for the use or application by the Issuer of Notes or the
proceeds thereof or of any money paid to the Issuer or upon Issuer Order under
any provisions hereof.
(b) Except as otherwise expressly provided herein and without
limiting the generality of the foregoing, the Trustee shall have no
responsibility or liability for or with respect to the existence or validity of
any of the Credits or Contracts, 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 any Series Trust Estate to the Trustee or of any intervening
assignment, the review of any Contract (it being understood that the Trustee has
not reviewed and does not intend to review the substance or form of any such
Contract), the performance or enforcement of any Contract, the compliance by the
Issuer, Trendwest, TFI or the Servicer with any covenant or the breach by the
Issuer, Trendwest, TFI or the Servicer of any warranty or representation made
hereunder or in any related document or the accuracy of any such warranty or
representation, any investment of monies in any Collection Account or any
Reserve Account or any loss resulting therefrom, the acts or omissions of the
Issuer, Trendwest, TFI, the Servicer or any Obligor, any action of the Servicer
taken in the name of the Trustee, or the validity of the Servicing Agreement,
the Sale Agreement or the Receivables Purchase Agreement.
(c) The Trustee shall not have any obligation or liability under any
Contract by reason of or arising out of this Indenture or the granting of a
security interest in such Contract hereunder or the receipt by the Trustee of
any payment relating to any Contract pursuant hereto, nor shall the Trustee be
required or obligated in any manner to perform or fulfill any of the obligations
of the Seller under or pursuant to any Contract, 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 Contract.
Section 7.05 May Hold Notes. The Trustee, the Servicer, any Paying
Agent, the Note Registrar, any Authenticating Agent or any other agent of the
Issuer, in its individual or any other capacity, may become the owner or pledgee
of Notes, and if operative, may otherwise deal with the Issuer with the same
rights it would have if it were not Trustee, Servicer, Paying Agent, Note
Registrar, Authenticating Agent or such other agent.
Section 7.06 Money Held in Trust. Money and investments held in
trust by the Trustee or any Paying Agent hereunder shall be held in one or more
trust accounts hereunder but need not be segregated from other funds except to
the extent required herein or required by law. The Trustee or any Paying Agent
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Issuer or otherwise specifically provided
herein.
Section 7.07 Compensation and Reimbursement. The Issuer agrees:
(i) to pay the Trustee monthly its fee for all services
rendered by it hereunder as Trustee for any Series, in the amount of
the Trustee Fee related to such Series (which compensation shall not
otherwise be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(ii) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable out-of-pocket
expenses, disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture or the Servicing
Agreement (including the reasonable compensation and the expenses and
disbursements of the Trustee's agents and counsel), except any such
expense, disbursement or advance as may be attributable to its
negligence, bad faith or willful misconduct; and
(iii) to indemnify and hold harmless each Series Trust Estate
and the Trustee from and against any loss, liability, expense, damage
or injury sustained or suffered pursuant to this Indenture by reason of
any acts, omissions or alleged acts or omissions arising out of
activities of such Series Trust Estate or the Trustee (including
without limitation any violation of any applicable laws by the Issuer
as a result of the transactions contemplated by this Indenture),
including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other expenses incurred in connection
with the defense of any actual or threatened action, proceeding or
claim; provided that the Issuer shall not indemnify the Trustee if such
loss, liability, expense, damage or injury is due to the Trustee's
negligence or willful misconduct, willful misfeasance or bad faith in
the performance of duties. Any indemnification pursuant to this Section
7.07 shall only be payable from the assets of the Issuer and shall not
be payable from the assets of any Series Trust Estate. The provisions
of this indemnity shall run directly to and be enforceable by an
injured person subject to the limitations hereof and this
indemnification agreement shall survive the termination of this
Indenture.
Upon the occurrence of an Event of Default with respect to any Series
resulting in an acceleration of maturity of the Notes of such Series that has
not been rescinded and annulled, the Trustee shall have, as security for the
performance of the Issuer under this Section 7.07, a lien ranking senior to the
lien of the Notes of such Series with respect to which any claim of the Trustee
under this Section 7.07 arose upon all property and funds held or collected as
part of the related Series Trust Estate by the Trustee in its capacity as
Trustee for such Series. The Trustee shall not institute any Proceeding seeking
the enforcement of such lien against any Series Trust Estate unless (i) such
Proceeding is in connection with a proceeding in accordance with Article Six
hereof for enforcement of the lien of this Indenture for the benefit of the
Holders of the Notes secured by such Series Trust Estate after the occurrence of
an Event of Default (other than an Event of Default due solely to a breach of
this Section 7.07) and a resulting declaration of acceleration or automatic
acceleration of maturity of such Notes that has not been rescinded and annulled,
or (ii) such Proceeding does not result in or cause a Sale or other disposition
of such Series Trust Estate. All monies so collected by the Trustee shall be
applied in accordance with Section 6.08 hereof, and the Trustee shall receive
amounts pursuant to Section 6.08 hereof only to the extent that payment thereof
will not result in a subsequent Event of Default caused by such payments to the
Trustee.
Section 7.08 Corporate Trustee Required; Eligibility. There shall
at all times be a trustee for each Series hereunder which shall be a corporation
or association organized and doing business under the laws of the United States
of America or of any State, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least $100,000,000, or
be a member of a consolidated bank holding company with a combined capital and
surplus of at least $100,000,000, subject to supervision or examination by
Federal or state authority and having an office within the United States of
America, and, except with respect to the initial Trustee hereunder, which shall
have a commercial paper or other short-term rating of the highest short term
rating categories by Fitch (or, if not rated by Fitch, by S&P or Moody's) or
otherwise acceptable to the Holders of not less than 66-2/3% in principal amount
of the Controlling Class of the Notes Outstanding of each affected Series. If
any such entity publishes reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section 7.08, the combined capital and surplus of
each such entity shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. If at any time the
Trustee for a Series shall cease to be eligible in accordance with the
provisions of this Section 7.08, it shall resign immediately in the manner and
with the effect hereinafter specified in this Article Seven.
Section 7.09 Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee for any Series and no appointment of a
successor Trustee pursuant to this Article Seven shall become effective until
the acceptance of appointment by the successor Trustee for such Series under
Section 7.10 hereof.
(b) The Trustee may resign at any time by giving 60 days' written
notice thereof to the Issuer and to each Noteholder. If an instrument of
acceptance by a successor Trustee shall not have been delivered to the Trustee
within 60 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee. Such court may thereupon, after such notice, if any, as it
may deem proper and prescribe, appoint a successor Trustee.
(c) The Trustee for any Series may be removed with or without cause
by the Act of the Holders of not less than 66-2/3% in principal amount of the
Controlling Class of Outstanding Notes of such Series by notice to the Trustee
at any time.
(d) If the Trustee for any Series shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause with respect to the Notes of such Series, the Holders of not less
than 66-2/3% in principal amount of the Controlling Class of Notes Outstanding
of such Series or the Issuer, with the written consent of Holders of not less
than 66-2/3% in principal amount of the Controlling Class of Notes Outstanding
of such Series, may appoint a successor Trustee.
(e) The Issuer shall give notice to the Servicer, the Custodian and
the Noteholders of such Series in the manner provided in Section 13.03 hereof of
each resignation and each removal of the Trustee of such Series and each
appointment of a successor Trustee with respect to the Notes of such Series.
Each notice shall include the name of the successor Trustee and the address of
its Corporate Trust Office.
Section 7.10 Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Issuer, each Noteholder of each affected Series and the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee for each affected
Series, but, on request of the Issuer or the successor Trustee, such retiring
Trustee shall, upon payment of its reasonable out-of-pocket costs and expenses,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee with respect to such Series,
and shall duly assign, transfer and deliver to such successor Trustee all
property and money held by such retiring Trustee with respect to such Series
hereunder, subject nevertheless to its lien, if any, provided for in Section
7.07 hereof. Upon request of any such successor Trustee, the Issuer shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Trustee all such rights, powers and trusts with
respect to such Series.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be eligible under this Article
Seven.
Section 7.11 Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any Person into which the Trustee for any Series may be
merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which such Trustee
shall be a party, or any entity succeeding to all or substantially all of the
corporate trust business of such Trustee, shall be the successor of such Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article Seven, without the execution or filing of any paper or any further
act on the part of any of the parties hereto. In case any Notes have been
authenticated, but not delivered, by the related Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
Section 7.12 Co-Trustees and Separate Trustees. At any time or
times, for the purpose of meeting the legal requirements of any jurisdiction in
which any portion of any Series Trust Estate may at the time be located, the
Issuer, and the Trustee for such Series shall have power to appoint, and, upon
the written request of such Trustee, or of the Holders representing at least 25%
of the aggregate principal amount of the Controlling Class of Notes Outstanding
of such Series, the Issuer shall for such purpose join with the Trustee in the
execution, delivery and performance of all instruments and agreements necessary
or proper to appoint, one or more Persons approved by such Trustee, either to
act as co-Trustee, jointly with such Trustee of all or any part of such Series
Trust Estate for such Series, or to act as separate Trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such Person or persons in the capacity aforesaid,
any property, title, right or power deemed necessary or desirable, subject to
the other provisions of this Section 7.12. If the Issuer does not join in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Event of Default has occurred and is continuing with respect to such
Series, the Trustee for such Series alone shall have power to make such
appointment.
Should any written instrument from the Issuer be reasonably required by
any co-Trustee or separate Trustee so appointed for more fully confirming to
such co-Trustee or separate Trustee such property, title, right or power, any
and all such instruments shall, on request, be executed, acknowledged and
delivered by the Issuer.
Every co-Trustee or separate Trustee for any Series shall, to the
extent permitted by law, but to such extent only, be appointed subject to the
following terms:
(i) the Notes of such Series shall be authenticated and
delivered by, and all rights, powers, duties and obligations hereunder
in respect of the custody of securities, cash and other personal
property held by, or required to be deposited or pledged with, the
Trustee of such Series hereunder, shall be exercised solely by such
Trustee;
(ii) the rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee of such Series in respect of any
property covered by such appointment shall be conferred or imposed upon
and exercised or performed by such Trustee or by such Trustee and such
co-Trustee or separate Trustee jointly, as shall be provided in the
instrument appointing such co-Trustee or separate Trustee, except to
the extent that under any law of any jurisdiction in which any
particular act is to be performed, such Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such
co-Trustee or separate Trustee;
(iii) the Trustee for any Series at any time, by an instrument
in writing executed by it, with the concurrence of the Issuer evidenced
by a Board Resolution, may accept the resignation of or remove any
co-Trustee or separate Trustee for such Series, appointed under this
Section 7.12, and, in case an Event of Default has occurred and is
continuing, such Trustee shall have power to accept the resignation of,
or remove, any such co-Trustee or separate Trustee without the
concurrence of the Issuer. Upon the written request of such Trustee,
the Issuer shall join with such Trustee in the execution, delivery and
performance of all instruments and agreements necessary or proper to
effectuate such resignation or removal. A successor to any co-Trustee
or separate Trustee that has so resigned or been removed may be
appointed in the manner provided in this Section 7.12;
(iv) no co-Trustee or separate Trustee for any Series
hereunder shall be personally liable by reason of any act or omission
of the Trustee for such Series or any other such Trustee hereunder nor
shall the Trustee for any Series be liable by reason of any act or
omission of any co-Trustee or separate Trustee selected by such Trustee
with due care or appointed in accordance with directions to such
Trustee pursuant to Section 6.14 hereof; and
(v) any Act of Noteholders for any Series delivered to the
Trustee for such Series shall be deemed to have been delivered to each
the co-Trustee and separate Trustee for any Series.
Section 7.13 Rights with Respect to the Servicer. The rights and
obligations of the Trustee for any Series with respect to the Servicer for any
Series shall be governed by the Servicing Agreement.
Section 7.14 Appointment of Authenticating Agent. The Trustee for
any Series may appoint an Authenticating Agent or Agents with respect to the
Notes of such Series which shall be authorized to act on behalf of such Trustee
to authenticate Notes of such Series issued upon original issue or upon
exchange, registration of transfer or pursuant to Section 3.06 hereof, and Notes
of such Series so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by such Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Notes by the Trustee or the Trustee's certificate
of authentication or the delivery of Notes to the Trustee for authentication,
such reference shall be deemed to include authentication and delivery on behalf
of the Trustee by an Authenticating Agent and a certificate of authentication
executed on behalf of the Trustee by an Authenticating Agent and delivery of the
Notes to the Authenticating Agent on behalf of the Trustee. Each Authenticating
Agent shall be acceptable to the Issuer and a majority in principal amount
Outstanding of the Noteholders and shall at all times be an entity having a
combined capital and surplus of not less than the equivalent of $50,000,000 and
subject to supervision or examination by Federal or state authority or the
equivalent foreign authority, in the case of an Authenticating Agent who is not
organized and doing business under the laws of the United States of America, any
state thereof or the District of Columbia. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section 7.14, the combined capital and surplus of such Authenticating
Agent shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of this
Section 7.14, such Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section 7.14.
Any entity into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any entity resulting from any
merger, conversion or consolidation to which such Authenticating Agent shall be
a party, or any entity succeeding to the corporate agency or entity trust
business of such Authenticating Agent, shall continue to be an Authenticating
Agent without the execution or filing of any paper or any further act on the
part of the Trustee or such Authenticating Agent; provided, such entity shall be
otherwise eligible under this Section 7.14.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Issuer. The Trustee for any Series may at any
time terminate the agency of an Authenticating Agent for such Series by giving
written notice thereof to such Authenticating Agent and to the Issuer. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section 7.14, such Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Issuer and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Notes for such Series, if any, with respect to which such
Authenticating Agent will serve, as their names and addresses appear in the Note
Register. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless eligible under the provisions of this Section 7.14.
The Trustee for each Series agrees to pay to each Authenticating Agent
for such Series from time to time reasonable compensation for its services under
this Section 7.14, but each Trustee shall not be entitled to be reimbursed for
such payments.
If an appointment is made pursuant to this Section 7.14, the Notes of
each Series may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternate certificate of authentication in the following
form:
This is one of the Notes described in the within-mentioned Series
Supplement.
[NAME OF TRUSTEE], as Trustee
By
As Authenticating Agent
By
Authorized Officer
Section 7.15 Custodian to Hold Contracts. The Custodian, as agent
(solely for the purpose of perfecting the security interest of the Trustee of
each Series in the Contracts and the related Custodian Files) and bailee of the
Trustee of each Series, shall hold each Contract, together with any documents
relating thereto that may from time to time be delivered to the Custodian, until
such time as such Contract is released from the lien of this Indenture pursuant
to the terms hereof. Within 10 days of the related Series Closing Date, the
Custodian will review each Custodian File related to such Series to determine
whether or not such file is complete, and it shall file an exception report with
the Issuer, the Trustee, the Servicer and each Noteholder of the related Series
within such time period. If an exception is not cured within 40 days of the
related Series Closing Date, the related Contract must be repurchased by
Trendwest within 30 days of the end of such 40-day period. The Trustee for such
Series shall have no responsibility or liability for the actions or inactions of
the Custodian.
The Trustee of each Series shall be under no duty or obligation to
inspect, review or examine the Contracts or the related Custodian Files for any
purpose, including, without limitation, to determine that the same are genuine,
enforceable or appropriate for the represented purpose or that they have
actually been recorded or that they are other than what they purport to be on
their face.
ARTICLE EIGHT OPTIONAL PURCHASE OF RECEIVABLES
Section 8.01 Optional Purchase of All Receivables; Liquidation of
Trust Estate. On the Business Day immediately preceding any Payment Date after
the aggregate principal amount of the then Outstanding Notes of any Series is
less than 10% of the original aggregate principal amount of the Notes of such
Series, the initial Servicer and TFI each shall have the option to purchase all
of the Series Collateral related to such Series; provided, however, that the
amount to be paid for such purchase (as set forth in the following sentence)
shall be sufficient to pay any amounts then due and payable with respect to such
Series to the Trustee and the Servicer, and the full amount of principal,
premium, if any, and interest then due and payable on the Notes of such Series,
and the Issuer shall redeem the Notes of such Series on such Payment Date
pursuant to Article X hereof. To exercise such option, the initial Servicer or
TFI, as the case may be, shall pay the aggregate Purchase Price for all of the
Receivables supporting the Notes of such Series and shall succeed to all
interests in and to the Series Collateral supporting such Series. The party
exercising such option to repurchase shall deposit the aggregate Purchase Price
for such Receivables into the Collection Account for such Series, and the
Trustee shall distribute the amounts so deposited in accordance with Section
12.02.
ARTICLE NINE SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of
Noteholders. (a) The Issuer, the Servicer and the Trustee, without the consent
of the Holders of any Notes, at any time and from time to time, may enter into
one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes, provided that any such amendment, as
evidenced by an Opinion of Counsel, will not have a material adverse effect on
Noteholders:
(1) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property; or
(2) to evidence the succession of another Person to the
Issuer, and the assumption by such successor of the covenants of the
Issuer herein and in the Notes contained, in accordance with Section
11.02(q) hereof; or
(3) to add to the covenants of the Issuer, for the benefit of the Holders
of all Notes of one or more Series, or to surrender any right or power herein
conferred upon the Issuer; or
(4) to convey, transfer, assign, mortgage or pledge any property to or with
the Trustee for the benefit of the Noteholders; or
(5) to evidence the succession of the Trustee pursuant to Article Seven
hereof.
No supplemental indenture that permits the issuance of the Notes in
coupon form will be of any force and effect unless the Trustee and the Issuer
shall have received an Opinion of Counsel to the effect that such amendment will
not adversely affect the Issuer's ability to deduct the interest paid on the
Notes. The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental indenture that affects the
Trustee's own rights, duties, liabilities or immunities under this Indenture or
otherwise.
Promptly after the execution by the Issuer, the Servicer and the
Trustee of any supplemental indenture pursuant to this Section 9.01, the Issuer
shall mail to each Noteholder and to the Rating Agency a copy of such
supplemental indenture.
(b) The Issuer, the Servicer and the Trustee, without the consent of
the Holders of the Notes Outstanding, at any time and from time to time, may
enter into one or more Series Supplements, in form satisfactory to the Trustee,
for the purpose of issuing a new Series of Notes in accordance with the terms
hereof. Any Series Supplement may supplement or modify the terms of this
Indenture, but such supplements or modifications shall only affect the Notes
issued pursuant to such Series Supplement.
Section 9.02 Supplemental Indentures with Consent of Noteholders.
With the consent of the Holders of not less than 66-2/3% in principal amount of
the Controlling Class of the Notes Outstanding of each affected Series, by Act
of said Holders delivered to the Issuer and the Trustee, the Issuer, the
Servicer and the Trustee may enter into an indenture or indentures supplemental
hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture relating to such Series or
of modifying in any manner the rights of the Holders of the Notes of such Series
under this Indenture; provided, however, that the number of Holders of any
Series required for any supplemental indenture may be modified as set forth in
the related Series Supplement; provided, further, that no such supplemental
indenture shall, without the consent of the Holders of each Outstanding Note of
each Series affected thereby:
(1) change the Stated Maturity of any Note or the due date of
any installment of principal of, or any installment of interest on, any
Note, or reduce the principal amount thereof or the Note Interest Rate
or change any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment; or
(2) reduce the percentage in principal amount of the
Outstanding Notes, the consent of the Holders of which is required for
any such supplemental indenture, or the consent of the Holders of which
is required for any waiver of compliance with certain provisions of
this Indenture or Events of Default or their consequences; or
(3) impair or adversely affect the related Series Trust Estate except as
otherwise permitted herein; or
(4) modify or alter the provisions of the proviso to the definition of the
term "Outstanding"; or
(5) modify any of the provisions of this Section 9.02, except
to increase the percentage of Holders of the Outstanding Notes of one
or more Series required for any modification or waiver or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Note
affected thereby; or
(6) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
related Series Trust Estate or terminate the lien of this Indenture on
any property at any time subject hereto or deprive the Holder of any
Note of the security afforded by the lien of this Indenture; or
(7) modify any of Sections 6.01(l) or (2), 6.02, 6.03, 6.08, 6.18, or
12.02(d) hereof.
It shall be necessary for any Act of Noteholders under this Section
9.02 to approve the particular form of any proposed supplemental indenture.
Promptly after the execution by the Issuer, the Servicer and the
Trustee of any supplemental indenture pursuant to this Section 9.02, the Issuer
shall mail to the Holders of the Notes and the Placement Agent a copy of such
supplemental indenture.
Section 9.03 Execution of Supplemental Indentures. In executing any
supplemental indenture permitted by this Article Nine or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be entitled
to receive upon request, and (subject to Section 7.01 hereof) shall be fully
protected in relying in good faith upon, an Opinion of Counsel reasonably
acceptable to the Trustee stating that the execution of such supplemental
indenture is authorized or permitted by this Indenture. The Trustee may, but
shall not be obligated to, enter into any such supplemental indenture which
affects the Trustee's own duties or immunities under this Indenture or
otherwise.
Section 9.04 Effect of Supplemental Indentures. Upon the execution
of any supplemental indenture under this Article Nine, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Notes theretofore
or thereafter authenticated and delivered hereunder shall be bound thereby.
Section 9.05 Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article Nine may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer shall so determine, new Notes so modified
as to conform, in the opinion of the Trustee and the Issuer, to any such
supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
ARTICLE TEN REDEMPTION OF NOTES
Section 10.01 Redemption at the Option of the Issuer; Election to
Redeem. The Issuer shall have the option to redeem the Notes of any Series, in
whole but not in part, as to the then Outstanding Notes of such Series, on any
Payment Date (the "Redemption Date") after the aggregate principal amount of the
then Outstanding Notes of such Series is less than 10% of the original aggregate
principal amount of the Notes of such Series, at the applicable Redemption Price
plus any fees due hereunder.
The Issuer shall set the Redemption Date and the Redemption Record Date
for any such Series and give notice thereof to the Trustee pursuant to Section
10.02 hereof.
Installments of interest and principal due on or prior to a Redemption
Date for a Series shall continue to be payable to the Holders of Notes of such
Series called for redemption as of the relevant Record Dates according to their
terms and the provisions of Section 3.07 hereof. The election of the Issuer to
redeem the Notes of any Series pursuant to this Section 10.01 shall be evidenced
by a Board Resolution directing the Trustee to make the payment of the
applicable Redemption Price on all of the Notes of such Series to be redeemed
from monies deposited with the Trustee pursuant to Section 10.04 hereof.
Section 10.02 Notice to Trustee. In the case of any redemption
pursuant to Section 10.01 hereof, the Issuer shall, at least 15 days prior to
the Redemption Date, notify the Trustee of such Redemption Date.
Section 10.03 Notice of Redemption by the Issuer. Upon receipt of
such notice and such deposit set forth in Section 10.02 above, the Trustee shall
provide notice of redemption pursuant to Section 10.01 hereof by first-class
mail, postage prepaid, mailed no later than the Business Day following the
Calculation Date on which such deposit was made, to each Holder of Notes whose
Notes are to be redeemed, at his address in the Note Register.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price; and
(3) that on the Redemption Date, the Redemption Price will
become due and payable upon each such Note, and that interest thereon
shall cease to accrue on the Redemption Date if the Redemption Price is
paid on such date.
Notice of redemption of the Notes of any Series shall be given by the
Trustee in the name and at the expense of the Issuer. Failure to give notice of
redemption, or any defect therein, to any Holder of any Note selected for
redemption shall not impair or affect the validity of the redemption of any
other Note.
Section 10.04 Deposit of the Redemption Price. On or before the
Business Day next preceding any Redemption Date, the Issuer shall deposit with
the Trustee or, if there is a Paying Agent, with the Paying Agent an amount of
monies sufficient to pay the Redemption Price of all Notes which are to be
redeemed on such Redemption Date plus any fees due hereunder.
Section 10.05 Notes Payable on Redemption Date. Notice of redemption
having been given as provided in Section 10.03 hereof, the Notes of each Series
being redeemed shall, on the applicable Redemption Date, become due and payable
at the applicable Redemption Price and on such Redemption Date (unless the
Issuer shall default in the payment of such Redemption Price) such Notes shall
cease to bear interest. The Holders of such Notes shall be paid the applicable
Redemption Price by the Paying Agent on behalf of the Issuer; provided, however,
that installments of principal and interest which are due on or prior to such
Redemption Date shall be payable to the Holders of the Notes of such Series
registered as such on the relevant Record Dates according to their terms and the
provisions of Section 3.07 hereof.
If the Holders of any Note called for redemption shall not be so paid,
the principal and premium, if any, shall, until paid, bear interest from the
applicable Redemption Date at the applicable Note Interest Rate.
ARTICLE ELEVEN REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 11.01 Representations and Warranties. The Issuer hereby
makes the following representations and warranties for the benefit of the
Trustee and the Noteholders of a Series on which the Trustee relies in accepting
the related Series Trust Estate in trust and in authenticating the Notes of each
Series. Such representations and warranties are made as of each Series Closing
Date (and only on the related Series Closing Date with respect to the Note
Purchase Agreements and each Series Supplement), but shall survive the transfer,
grant and assignment of the related Series Trust Estate to the Trustee.
(a) Organization and Good Standing. The Issuer is a corporation duly
organized, validly existing and in good standing under the law of the State of
Delaware and each other State where the nature of its business requires it to
qualify, except to the extent that the failure to so qualify would not in the
aggregate materially adversely affect the ability of the Issuer to perform its
obligations under this Indenture, each Series Supplement, the Notes, the Note
Purchase Agreements, the Custodian Agreement or the Sale Agreement.
(b) Authorization. The Issuer has the power, authority and legal
right to execute, deliver and perform this Indenture, each Series Supplement,
the Notes, the Note Purchase Agreements, the Custodian Agreement and the Sale
Agreement and the execution, delivery and performance of this Indenture, each
Series Supplement, the Notes, the Note Purchase Agreements, the Custodian
Agreement and the Sale Agreement have been duly authorized by the Issuer by all
necessary action.
(c) Binding Obligation. This Indenture, each Series Supplement, the
Notes, the Note Purchase Agreements, the Custodian Agreement and the Sale
Agreement have been duly executed and delivered by the Issuer, and each of this
Indenture and each Series Supplement, assuming due authorization, execution and
delivery by the Trustee and the Servicer, the Sale Agreement, assuming due
authorization, execution and delivery by TFI and Trendwest, each Note Purchase
Agreement, assuming due authorization, execution and delivery by each initial
purchaser of related Notes, and the Custodian Agreement, assuming due
authorization, execution and delivery by the Trustee, the Custodian and the
Servicer, each constitutes a legal, valid and binding obligation of the Issuer,
enforceable against the Issuer in accordance with its terms except that (A) 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 (B) 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.
(d) No Violation. The consummation of the transactions contemplated
by the fulfillment of the terms of this Indenture, each Series Supplement, the
Notes, the Note Purchase Agreements, the Custodian Agreement and the Sale
Agreement 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 organizational documents or bylaws of the Issuer, or any
material indenture, agreement, mortgage, deed of trust or other instrument to
which the Issuer is a party or by which it is bound, or in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of such
indenture, agreement, mortgage, deed of trust or other such instrument, other
than any Lien created or imposed pursuant to the terms of this Indenture, each
Series Supplement or the Sale Agreement, or violate any law or, to the best of
the Issuer's knowledge, after due inquiry, any material order, rule or
regulation applicable to the Issuer of any court or of any federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Issuer or any of its properties.
(e) No Proceedings. There are no Proceedings or investigations to
which the Issuer, or any of the Issuer's Affiliates, is a party pending, or, to
the knowledge of Issuer, threatened, before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality (A)
asserting the invalidity of this Indenture, any Series Supplement, the Sale
Agreement, the Receivables Purchase Agreement, the Note Purchase Agreements, the
Custodian Agreement or the Notes, (B) seeking to prevent the issuance of the
Notes of any Series or the consummation of any of the transactions contemplated
by the Sale Agreement, the Receivables Purchase Agreement, this Indenture, any
Series Supplement, the Note Purchase Agreements, the Custodian Agreement or the
Notes of any Series or (C) seeking any determination or ruling that would
materially and adversely affect the performance by the Issuer of its obligations
under, or the validity or enforceability of, this Indenture, any Series
Supplement, the Sale Agreement, the Receivables Purchase Agreement, the Note
Purchase Agreements, the Custodian Agreement or the Notes.
(f) Approvals. All approvals, authorizations, consents, orders or
other actions of any Person, or of any court, governmental agency or body or
official, required in connection with the execution and delivery of this
Indenture, each Series Supplement, the Note Purchase Agreements, the Custodian
Agreement or the Sale Agreement and with the valid and proper authorization,
issuance and sale of the Notes of each Series pursuant to this Indenture and the
related Series Supplement and the related Note Purchase Agreements (except
approvals of State securities officials under the Blue Sky laws), have been or
will be taken or obtained on or prior to the applicable Series Closing Date.
(g) Name and Place of Business. The Issuer's legal name is as set
forth in this Indenture. The Issuer has not used or done business under any
other name in the previous five-year period. The Issuer's principal place of
business and chief executive office is located at 3250 Lakeport Boulevard,
Klamath Falls, Oregon 97601, or at such other location where all action required
by Section 11.02(f) hereof shall have been taken place with respect to the
related Series Trust Estate. The Issuer has not used any other address in the
previous five-year period.
(h) Transfer and Assignment. Upon the delivery to the Custodian of
the Contracts and the filing of the UCC financing statements described in
Sections 4.01(c)(vii) and 4.02(a) hereof, the Trustee for the benefit of the
Noteholders of any Series shall have a first priority perfected security
interest in the Receivables, the Contracts and in the proceeds thereof
supporting such Series, except for Liens permitted under Section 11.02(a) and
limited to the extent set forth in Section 9-306 of the UCC as in effect in the
applicable jurisdiction. All filings (including, without limitation, UCC
filings) as are necessary in any jurisdiction to perfect the interest of the
Trustee in the related Series Trust Estate (other than the Credits), including
the transfer of the Contracts and the payments to become due thereunder, have
been made.
(i) Stockholders of the Issuer. TFI is the sole holder of all of the
issued and outstanding stock of the Issuer; all of such shares has been fully
paid and are owned of record, free and clear of all mortgages, assignments,
pledges, security interests, warrants, options and rights to purchase. The
Issuer will not permit TFI to transfer such shares of the Issuer without the
consent of the Holders of a majority in principal amount of Notes Outstanding of
each Series.
(j) Sale Agreement. As of the Closing Date, the Issuer has entered
into the Sale Agreement and the Assignment with TFI relating to its acquisition
of the Receivables related to the Contracts identified therein and a security
interest in such Contracts and the related Credits, and the representations and
warranties made by TFI and Trendwest relating to such Contracts, such
Receivables and such interests in the related Credits have been validly assigned
to and are for the benefit of the Issuer, the Trustee and the Noteholders and
such representations and warranties are true and correct in all material
respects.
(k) Bulk Transfer Laws. The transfer, assignment and conveyance of
the Receivables and the grant of a security interest in the related Contracts
and the related Credits by TFI to the Issuer pursuant to the Sale Agreement or
by the Issuer pursuant to this Indenture is not subject to the bulk transfer or
any similar statutory provisions in effect in any applicable jurisdiction.
(l) Solvency. Neither on the date of the transactions contemplated by
the Transaction Documents or immediately before or after such transactions, nor
as a result of the transactions, will the Issuer:
(A) be insolvent such that the sum of its debts is greater than all of its
respective property, at a fair valuation;
(B) be engaged in, or about to engage in, business or a
transaction for which any property remaining with the Issuer will be an
unreasonably small capital or the remaining assets of the Issuer will
be unreasonably small in relation to its respective business or the
transaction; and
(C) have intended to incur, or believed it would incur, debts
that would be beyond its respective ability to pay as such debts mature
or become due. The Issuer's assets and cash flow enable it to meet its
present obligations in the ordinary course of business as they become
due.
(m) Tax Returns. All tax returns or extensions required to be filed
by the Issuer in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon the Issuer, or upon any of
the respective properties, income or franchises shown to be due and payable on
such returns have been, or will be, paid. To the best of the Issuer's knowledge,
all such tax returns are true and correct and the Issuer has no knowledge of any
proposed additional tax assessment against it in any material amount nor of any
basis therefor. The provisions for taxes on the books of the Issuer are in
accordance with generally accepted accounting principles.
(n) Tax Reporting. The Issuer will treat the acquisition of the
Receivables and the security interest in the related Contracts and the related
Credits as a sale to the Issuer for federal, State and local income tax
reporting and accounting purposes.
(o) Subsidiaries. The Issuer has no subsidiaries.
(p) Pension Plans. Each pension plan or profit sharing plan to which
the Issuer is a party has been fully funded in accordance with the obligations
of the Issuer set forth in such plan.
(q) Constituent Documents. The Issuer will not amend its Certificate of
Incorporation or its By-Laws without the consent of the Trustee and the Holders
of a majority in principal amount of the Notes Outstanding of each Series.
(r) Value of Receivables. With respect to each Series, as of the
applicable Series Cut-Off Date, the aggregate principal balance of the related
Receivables equaled the related Initial Aggregate Collateral Value.
(s) Term of Contracts. With respect to each Series, as of the related
Series Closing Date, the Series Contract Schedule accurately reflects the
duration of each related Contract.
Section 11.02 Covenants. The Issuer hereby makes the following
covenants on which the Trustee relies in accepting the Series Trust Estate
related to any Series in trust and in authenticating the Notes of such Series.
Such covenants are made as of the related Series Closing Date, but shall survive
the transfer, grant and assignment of such Series Trust Estate to the Trustee.
(a) No Liens. Except for the conveyances and grant of security
interests hereunder, the Issuer will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien on any
portion of the Series Trust Estate supporting any Series of Notes now existing
or hereafter created, or any interest therein prior to the termination of this
Indenture pursuant to Section 5.01 hereof; the Issuer will notify the Trustee of
the existence of any such Lien immediately upon discovery thereof; and the
Issuer shall defend the right, title and interest of the Trustee in, to and
under each Series Trust Estate now existing or hereafter created, against all
claims of third parties claiming through or under the Issuer; provided, however,
that nothing in this Section 11.02(a) shall prevent or be deemed to prohibit the
Issuer from suffering to exist upon any Series Trust Estate any Liens for
municipal or other local taxes and other governmental charges if such taxes or
governmental charges shall not at the time be due and payable or if the Issuer
shall currently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto.
(b) Delivery of Collections. The Issuer agrees to hold in trust and
promptly pay to the Servicer all amounts received by the Issuer in respect of
each Series Trust Estate (other than amounts distributed to or for the benefit
of the Issuer pursuant to Article Twelve hereof).
(c) Obligations with Respect to Contracts. The Issuer will duly
fulfill all obligations on its part to be fulfilled under or in connection with
each Receivable and will do nothing to impair the rights of the Trustee (for the
benefit of the Noteholders) in the Receivables, the Contracts and any other part
of each Series Trust Estate. As long as there is no event of default under the
applicable Contract, the Issuer will not disturb the Obligor's use of the Club
in accordance with the rules of the Club.
(d) Compliance with Law. The Issuer will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Contracts or any part thereof,
provided, however, that the Issuer may contest any act, regulation, order,
decree or direction in any reasonable manner which shall not materially and
adversely affect the rights of the Trustee (for the benefit of the Noteholders)
in the Receivables, the Contracts and the related Credits. The Issuer will
comply, in all material respects, with all requirements of law applicable to the
Issuer.
(e) Preservation of Security Interest. The Issuer shall execute and
file such continuation statements and any other documents which may be required
by law or which the Trustee deems appropriate to fully preserve and protect the
interest of the Trustee (for the benefit of the Noteholders) in the Series Trust
Estate supporting each such Series of Notes.
(f) Maintenance of Office, etc. The Issuer will not, without
providing 30 days' prior written notice to the Trustee and each Noteholder and
without filing such amendments to any previously filed financing statements as
the Trustee may require or as may be required in order to maintain the Trustee's
perfected security interest in the Series Trust Estate (other than the Credits)
supporting each such Series of Notes, (a) change the location of its chief
executive office, or (b) change its name, identity or corporate structure in any
manner which would make any financing statement or continuation statement filed
by the Issuer in accordance with the Servicing Agreement or this Indenture
seriously misleading within the meaning of Article 9-402(7) of any applicable
enactment of the UCC.
(g) Further Assurances. Except as set forth in Section 11.02(e), the
Issuer will make, execute or endorse, acknowledge, and file or deliver to the
Trustee from time to time such schedules, confirmatory assignments, conveyances,
transfer endorsements, powers of attorney, certificates, reports and other
assurances or instruments and take such other steps relating to each Series
Trust Estate, as the Trustee may request and reasonably require.
(h) Notice of Liens. The Issuer shall notify the Trustee and each
Noteholder promptly after becoming aware of any Lien on any Series Trust Estate,
except for any Liens for municipal or other local taxes if such taxes shall not
at the time be due or payable without penalty.
(i) Activities of the Issuer. The Issuer (a) shall engage in only (1)
the acquisition, ownership, selling and pledging of the property acquired by the
Issuer pursuant to the Sale Agreement (including the ability to enter into a new
installment contract with an Obligor pursuant to an Upgrade), and causing the
issuance of, receiving and selling the Notes issued pursuant to this Indenture
and (2) the exercise of any powers permitted to corporations under the General
Corporation Law of the State of Delaware which are incidental to the foregoing
or necessary to accomplish the foregoing; (b) will (1) maintain its books and
records separate from the books and records of any other entity, (2) maintain
separate bank accounts and no funds of the Issuer shall be commingled with funds
of any other entity, (3) keep in full effect its existence, rights and
franchises as a corporation under the laws of the State of Delaware, and will
obtain and preserve its qualification to do business as a foreign corporation in
each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Indenture, (4) conduct its
business from an office or office space separate from the office of TFI and
Trendwest and will maintain a telephone number separate from that of TFI and
Trendwest, and (5) operate its business generally so as not to be substantively
consolidated with any of its Affiliates; and (c) will not (1) dissolve or
liquidate in whole or in part, (2) own any subsidiary or lend or advance any
moneys to, or make an investment in, any Person, (3) make any capital
expenditures, (4)(A) 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,
arrangement, adjustment, wind-up, liquidation, dissolution, composition or other
relief with respect to it or its debts, (B) seek appointment of a receiver,
trustee, custodian or other similar official for it or any part of its assets,
(C) make a general assignment for the benefit of creditors (other than as
contemplated herein), or (D) take any action in furtherance of, or consenting or
acquiescing in, any of the foregoing, (5) guarantee (directly or indirectly),
endorse or otherwise become contingently liable (directly or indirectly) for the
obligations of, or own or purchase any stock, obligations or securities of or
any other interest in, or make any capital contribution to, any other Person,
(6) merge or consolidate with any other Person, except as permitted pursuant to
Section 11.02(q) hereof, (7) engage in any other action that adversely affects
whether the separate legal identity of the Issuer will be respected, including
without limitation (A) holding itself out as being liable for the debts of any
other party or (B) acting other than in its corporate name and through its duly
authorized officers or agents, or (8) create, incur, assume, or in any manner
become liable in respect of any indebtedness other than that contemplated herein
or trade payables and expense accruals incurred in the ordinary course of
business and which are incidental to its business purpose. The Issuer shall not
amend any article in its Certificate of Incorporation or its By-Laws that deals
with any matter discussed above without the prior written consent of the Holders
of not less than 66-2/3% in aggregate principal amount of the Outstanding Notes.
(j) Directors. The Issuer agrees that at all times at least one
director and one executive officer of the Issuer will not be a director, officer
or employee of any direct or ultimate parent, or Affiliate of such parent or of
the Issuer or a brother, sister, parent, child or spouse of any of the
foregoing; provided, however, that (a) such independent director may also be the
independent officer and (b) such independent director and such independent
officer may serve in similar capacities for other "special purpose corporations"
formed by the Issuer and its Affiliates. The Issuer's Certificate of
Incorporation shall at all times provide that such independent director shall
have a fiduciary duty to the Holders of the Notes.
(k) Consolidated Return. The Issuer is not a member of an affiliated
group with TFI or Trendwest within the meaning of Section 1504 of the Code and
will not file a consolidated return with either of TFI or Trendwest for federal
income tax purposes at any time until after the termination of this Indenture.
(1) Security Interest in the Contracts and the Credits. The Issuer
warrants that it has a valid security interest in the Contracts and the Credits
and that it will defend its security interest in such Contracts and Credits
against all Persons, claims and demands whatsoever. The Issuer shall not assign,
sell, pledge, or exchange, or in any way encumber or otherwise dispose of its
interest in the Contracts and the Credits, except as permitted under this
Indenture.
(m) Taxable Income from the Receivables. The Issuer shall treat the
Receivables as owned by it for federal, State and local income tax purposes, and
any affiliated group of which the Issuer is a member within the meaning of
section 1504 of the Code shall treat the Receivables as owned by the Issuer for
federal, State and local income tax purposes, shall report and include in the
computation of the Issuer's gross income for such tax purposes in its
consolidated or combined return the income from the Receivables and the
Contracts, and shall deduct the interest paid or accrued with respect to the
Notes in accordance with its applicable method of accounting for such purposes.
(n) Maintenance of Office or Agency. The Issuer will maintain an
office or agency within the United States of America where Notes may be
presented or surrendered for payment, where Notes may be surrendered for
registration of transfer or exchange and where notices and demand to or upon the
Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Trustee at the Corporate Trust Office for each of
said purposes. The Issuer will give 30 days' prior written notice to the Trustee
and the Noteholders of any change in the location, of any such office or agency.
If at any time the Issuer shall fail to maintain any such office or agency or
shall fail to furnish the Trustee and the Noteholders with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Trustee, and the Issuer hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.
(o) Money for Note Payments to Be Held in Trust. The Trustee shall
execute and deliver, and if there is any Paying Agent other than the Trustee,
the Issuer will cause each Paying Agent other than the Trustee to execute and
deliver to the Trustee an instrument in which such Paying Agent shall agree with
the Trustee that, subject to the provisions of this Section 11.02, such Paying
Agent will:
(i) hold all sums held by it for the payment of principal of
or interest on Notes in trust for the benefit of the Noteholders
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(ii) give the Trustee notice of any Default by the Issuer (or any other
obligor upon the Notes) in the making of any payment of principal or interest;
and
(iii) at any time during the continuance of any such Default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by such Paying Agent; and, upon
such payment by any Paying Agent to the Trustee, such Paying Agent shall be
released from all further liability with respect to such money.
(p) Enforcement of Servicing Agreement, the Sale Agreement and
Receivables Purchase Agreement. The Issuer will take all actions necessary, and
diligently pursue all remedies available to it, to the extent commercially
reasonable, to enforce the obligations of the Servicer under the Servicing
Agreement, TFI and Trendwest under the Sale Agreement and Trendwest, the Prior
Issuer and TW Holdings under the Receivables Purchase Agreement and to secure
its rights thereunder.
(q) Issuer May Consolidate, etc., Only on Certain Terms. The Issuer
shall not consolidate or merge with or into any other Person or convey or
transfer its properties and assets substantially as an entirety to any Person,
unless:
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger or which acquires by conveyance
or transfer the properties and assets of the Issuer substantially as an
entirety shall be a Person organized and existing as a limited purpose
entity under the laws of the United States of America or any State
thereof and shall have expressly assumed, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form reasonably
satisfactory to the Trustee, the obligation to make due and punctual
payments of the principal of and interest on all of the Notes and to
perform every covenant of this Indenture on the part of the Issuer to
be performed or observed; and
(ii) immediately after giving effect to such transaction, no Event of
Default or Default shall have occurred and be continuing; and
(iii) the Issuer shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger, conveyance or transfer and such supplemental
indenture comply with this Article Eleven and that all conditions
precedent herein relating to such transaction have been complied with;
and
(iv) such consolidation, merger, conveyance or transfer shall
be on such terms as shall fully preserve the lien and security hereof,
the perfection and priority thereof and the rights and powers of the
Trustee and the Holders of the Notes hereunder; and
(v) the surviving entity shall be a "special purpose entity";
i.e., shall have an organizational charter substantially similar to the
Certificate of Incorporation and the By-Laws of the Issuer including
specific limitations on the business purposes, and provisions for
independent directors; and
(vi) the Issuer shall have obtained the prior written consent
of the Holders of the Notes, which shall not be unreasonably withheld.
(r) Successor Substituted. Upon any consolidation or merger, or any
conveyance or transfer of the properties and assets of the Issuer substantially
as an entirety in accordance with Section 11.02(q) hereof, the Person formed by
or surviving such consolidation or merger (if other than the Issuer) or the
Person to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein. In the event of any such conveyance or transfer, the Person named
as the "Issuer" in the first paragraph of this instrument or any successor which
shall theretofore have become such in the manner prescribed in this Article
Eleven shall be released from its liabilities as obligor and maker on all the
Notes and from its obligations under this Indenture and may be dissolved,
wound-up and liquidated at any time thereafter.
(s) Use of Proceeds. The proceeds from the sale of the Notes of each
Series will be used by the Issuer (i) to pay the related Acquisition
Consideration, (ii) to pay the expenses associated with the issuance of such
Notes pursuant to this Indenture and the related Series Supplement and the
transactions contemplated hereby, thereby and by the Sale Agreement, the
Receivables Purchase Agreement and the Servicing Agreement and (iii) for the
Issuer's general business purposes. None of the transactions contemplated in
this Indenture, each Series Supplement, the Sale Agreement, the Receivables
Purchase Agreement or the Servicing Agreement (including the use of the proceeds
from the sale of the Notes) will result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued pursuant
thereto, including Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II. The Issuer does not own or intend
to carry or purchase any "margin security" within the meaning of said Regulation
G, including margin securities originally issued by it or any "margin stock"
within the meaning of said Regulation U.
(t) Investment Company Act of 1940. The Issuer will at all times
conduct its operations in a manner which will not subject it to registration as
an "investment company" under the Investment Company Act of 1940, as amended.
(u) Transactions with Affiliates. The Issuer will not enter into or
cause, suffer or permit to exist any arrangement or contract with any of its
Affiliates unless such arrangement or contract is fair and equitable to the
Issuer, is commercially reasonable and is an arrangement or contract no less
favorable to the Issuer than generally available on an arms-length basis in
equitable transactions with third parties.
(v) Delivery of Custodian Files. The Issuer shall deliver, or cause
to be delivered, to the Custodian the Custodian Files related to the Contracts
identified on each Series Contract Schedule within 10 days of the related Series
Closing Date in accordance with Section 4.01(c)(ii) hereof.
(w) Rule 144A Transfers. The Issuer will deliver with reasonable
promptness any financial or other information that a Holder may reasonably
request from time to time to permit such Holder to comply with the requirements
of Rule 144A under the Securities Act of 1933, as amended, in connection with
the resale of Notes by such Holder.
(x) The Issuer will not, and will not permit any of its Affiliate to,
purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of
the Notes except in accordance with Article 10 hereof.
(y) The Issuer shall provide to the Trustee or any Noteholder and
their duly authorized representatives, attorneys or accountants access to any
and all documentation and to any existing data processing systems (including,
but not limited to, any data that can reasonably be generated therefrom)
regarding each Series Trust Estate (including the Contract Schedule) that the
Issuer may possess, such access being afforded at no cost to the Issuer (except
during the continuance of an Event of Default hereunder), but only upon
reasonable request and during normal business hours so as not to interfere
unreasonably with the Issuer's normal operations or customer or employee
relations, at offices designated by the Issuer.
Section 11.03 Other Matters as to the Issuer. (a) Limitation on
Liability of Directors, Officers, or Employees of the Issuer. The directors,
officers, or employees of the Issuer shall not be under any liability to the
Trustee, the Noteholders, the Issuer, the Servicer or any other Person hereunder
or pursuant to any document delivered hereunder, it being expressly understood
that all such liability is expressly waived and released as a condition of, and
as consideration for, the execution of this Indenture and the issuance of each
Series of Notes.
(b) Parties Will Not Institute Insolvency Proceedings. So long as
this Indenture is in effect, and for one year and one day following its
termination, none of the parties hereto or any Affiliate thereof will (i) file
any involuntary petition against or by the Issuer or (ii) otherwise institute
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or State bankruptcy or similar
law against or by the Issuer, or (iii) directly or indirectly, collude or act in
concert with, or coerce, entice or provide other encouragement to, the Issuer or
any creditor of the Issuer in connection with any such filing or proceeding
described in clause (i) or clause (ii) of this Section 11.03(b); provided,
however, that the Trustee shall not be prohibited from taking any such actions
after an Event of Default if it is acting at the direction of Holders of not
less than 66-2/3% in principal amount of Notes Outstanding (or, with respect to
an Event of Default that does not affect all Series of Notes Outstanding,
66-2/3% in principal amount of Notes Outstanding of each such affected Series).
ARTICLE TWELVE ACCOUNTS AND ACCOUNTINGS
Section 12.01 Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trustee pursuant to this Indenture. The Trustee shall hold all
such money and property so received by it as part of the applicable Series Trust
Estate and shall apply it as provided in this Indenture. If any Contract becomes
a Defaulted Contract, the Trustee, upon the written request of the Issuer or the
Servicer may, and upon the request of the Holders of a majority in principal
amount of the Outstanding Notes shall, take such action as may be reasonably
necessary to assist the Servicer to enforce such payment or performance,
including the institution and prosecution of appropriate Proceedings. Any such
action shall be without prejudice to any right to claim a Default or Event of
Default under this Indenture and to proceed thereafter as provided in Article
Six hereof.
Section 12.02 Collection Account; Distribution Account. (a) Prior to
each Series Closing Date, the Trustee shall open and maintain an account for
such Series (which shall be comprised of a depository account and a daily
investment account (collectively, for each Series, the "Collection Account")),
which at all times shall be an Eligible Account and which may be established at
the Collection Account Bank, for the benefit of the Noteholders of such Series,
for the receipt of (i) amounts deposited by the Subservicer into the Clearing
Account attributable to such Series and (ii) any Reinvestment Income on such
account. Funds in each Collection Account shall not be commingled with any other
monies. All monies deposited from time to time in the Collection Account for a
Series pursuant to this Indenture shall be held in the name of the Trustee as
part of the related Series Trust Estate as herein provided. The fees relating to
each Collection Account shall be paid out of the investment income of such
Collection Account, and the Servicer and the Issuer shall be responsible for
paying any fees or expenses not paid out of such investment income. The Trustee
shall not be responsible for paying such fees and expenses.
Prior to each Series Closing Date, the Trustee shall open and maintain
a trust account for such Series (for each Series, the "Distribution Account"),
which at all times shall be an Eligible Account for the benefit of the
Noteholders of such Series, for the receipt of (i) amounts transferred from the
Collection Account for such Series pursuant to Section 12.02(d) hereof, and (ii)
amounts transferred from the Reserve Account for such Series in accordance with
Section 12.03 hereof and the applicable Series Supplement. Funds in each
Distribution Account shall not be commingled with any other monies. All payments
to be made from time to time by the Issuer to the Noteholders of a Series out of
funds in the related Distribution Account pursuant to this Indenture shall be
made by the Trustee or the Paying Agent of the Issuer. All monies deposited from
time to time in each Distribution Account pursuant to this Indenture shall be
held by the Trustee as part of the related Series Trust Estate as herein
provided. Amounts deposited in each Distribution Account shall remain
uninvested; provided, however, that if the Trustee has actual knowledge that any
such amounts will remain in the Distribution Account for any Series more than
one Business Day after the day amounts are deposited in such account, such
amounts shall be deposited in Eligible Investments, and any earnings thereon
shall be remitted by the Trustee to the Collection Account for such Series.
(b) Upon Issuer Order, the Trustee shall direct the depository
institution or trust company holding any Collection Account to invest the funds
in such Collection Account in Eligible Investments. The Issuer Order shall
specify the Eligible Investments in which such amounts shall be invested, shall
state that the same are Eligible Investments and shall further specify the
percentage of funds to be invested in each Eligible Investment. No such Eligible
Investment shall mature later than the Business Day preceding the next following
Remittance Date and shall not be sold or disposed of prior to its maturity. In
the absence of an Issuer Order, the Trustee shall invest funds in such
Collection Account in Eligible Investments described in clause (vi) of the
definition thereof. Eligible Investments shall be made in the name of the
Trustee for the benefit of the Noteholders of the related Series. The Trustee
shall have no responsibility for verifying that any investments directed by the
Issuer are Eligible Investments.
(c) Any income or other gain from investments in Eligible Investments
as outlined in (b) above shall be credited to the applicable Collection Account
and any loss resulting from such investments shall be charged to such account;
provided, however, that the Issuer shall make or cause to be made no later than
the applicable Payment Date a deposit to the applicable Collection Account to
the extent of any losses therein caused as a result of the Issuer's investment
instructions provided for herein. The Trustee shall not be liable for any loss
incurred on any funds invested in Eligible Investments pursuant to the
provisions of this Section 12.02.
(d) On each Payment Date, the Trustee shall pay amounts out of the
Collection Account for each Series as set forth in the related Series
Supplement.
(e) Upon the Issuer's or the Trustee's obtaining actual knowledge of
the occurrence of any Trigger Event with respect to any Series, the Issuer or
the Trustee, as the case may be, shall within two Business Days of obtaining
such actual knowledge notify the Noteholders of such Series of such occurrence.
Section 12.03 Reserve Accounts (a) Prior to the Closing Date, the
Trustee shall open and maintain a trust account for each Series (with respect to
each Series, the "Reserve Account"), which at all times will be an Eligible
Account, for the benefit of the Noteholders of such Series, for the receipt of
the deposit of the initial Reserve Account Required Balance for such Series by
Issuer and of deposits pursuant to Section 5.01 of the applicable Series
Supplement. The Issuer agrees to deposit the initial Reserve Account Required
Balance for each Series in the related Reserve Account on or prior to the
related Series Closing Date. Monies received in the Reserve Account for any
Series will be invested at the written direction of the Issuer in Eligible
Investments during the term of this Indenture, and any income or other gain
realized from such investment, shall be held by the Trustee in such Reserve
Account as part of the related Series Trust Estate as security for the Notes
subject to disbursement and withdrawal as herein provided. Unless otherwise set
forth in the applicable Series Supplement, monies shall be subject to withdrawal
in accordance with Section 12.03(d) hereof.
(b) Upon Issuer Order all or a portion of each Reserve Account shall
be invested and reinvested at TFI's written direction in one or more Eligible
Investments. In the absence of an Issuer Order, the Trustee shall invest funds
in any Reserve Account in Eligible Investments described in clause (vi) of the
definition thereof. All income or other gain from such investments shall be
credited to the applicable Reserve Account and any loss resulting from such
investments shall be charged to the applicable Reserve Account; provided,
however, that the Issuer shall make or cause to be made on any Remittance Date a
deposit to the applicable Reserve Account to the extent of any losses therein
caused as a result of the Issuer's investment instructions. No Eligible
Investment shall mature later than the Business Day preceding the next following
Payment Date and shall not be sold or disposed of prior to its maturity.
Eligible Investments shall be made in the name of the Trustee for the benefit of
the Noteholders of the applicable Series. The Trustee shall provide to the
Servicer a monthly account statement showing deposits and withdrawals in such
month and listing such investments, describing the Eligible Investments in which
such amounts have been invested.
(c) If any amounts invested as provided in Section 12.03(b) hereof
shall be needed for disbursement from any Reserve Account as set forth in
Section 12.03(d) hereof, the Trustee shall cause such investments of such
Reserve Account to be sold or otherwise converted to cash to the credit of such
Reserve Account. The Trustee shall not be liable for any investment loss
resulting from investment of money in any Reserve Account in any Eligible
Investment in accordance with the terms hereof (other than in its capacity as
obligor under any Eligible Investment).
(d) Disbursements from the Reserve Account relating to each Series
shall be made, to the extent funds therefor are available, only as set forth in
the related Series Supplement.
Section 12.04 Reports by Trustee to Noteholders. (a) On each Payment
Date, the Servicer, on behalf of the Trustee, shall account to the Holders of
Notes of each Series and to Fitch on which payments of principal and interest
are then being made the amount which represents principal and the amount which
represents interest, and shall contemporaneously advise the Issuer of all such
payments. The Servicer, on behalf of the Trustee, may satisfy its obligations
under this Section 12.04 by delivering the Monthly Servicer's Report to each
such Noteholder, Fitch and the Issuer. On or before the 10th day prior to the
Final Payment Date for a Series, the Trustee shall provide notice to Fitch and
to the Holders of the Notes of such Series of such Final Payment Date. Such
notice shall include a statement that if the Notes of such Series are paid in
full on such Final Payment Date, interest shall cease to accrue as of the last
day preceding the date on which such Final Payment Date occurs.
(b) The Issuer shall, on a monthly basis beginning on the first
Calculation Date, confirm the credit rating or, if more than one credit rating
has been assigned, each such credit rating of each institution in which funds
are invested pursuant to clause (vi) of the definition of Eligible Investments
and shall promptly notify the Trustee and the Noteholders if any such credit
rating has been lowered.
(c) At least annually, the Trustee shall distribute to Noteholders
any Form 1099 or similar information returns required by applicable tax law to
be distributed to the Noteholders and received in accordance with the next
sentence. The Trustee shall prepare or cause to be prepared all such information
for distribution by the Trustee to the Noteholders.
ARTICLE THIRTEEN PROVISIONS OF GENERAL APPLICATION
Section 13.01 Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by an agent duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall become effective when
such instrument or instruments are delivered to the Trustee, and, where it is
hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
7.01 hereof) conclusive in favor of the Trustee and the Issuer, if made in the
manner provided in this Section 13.01.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind the Holder of every
Note issued upon the registration of transfer thereof or in exchange therefor or
in lieu thereof, in respect of anything done, omitted or suffered to be done by
the Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
(e) The Holders of not less than 66-2/3% in principal amount of the
Controlling Class of Notes Outstanding of a Series may on behalf of the Holders
of all the Notes of such Series waive any Cash Accumulation Event or Trigger
Event that occurs with respect to such Series.
Section 13.02 Notices, etc., to Trustee, Issuer, Servicer and the
Rating Agency. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with any party hereto
shall be sufficient for every purpose hereunder if in writing and telecopied or
mailed, first-class postage prepaid and addressed to the appropriate address
below:
(a) to the Trustee at 135 South LaSalle Street, Suite 1625,
Chicago, Illinois 60674 (facsimile number (312) 904-2084), Attention:
Asset Backed Securities Trust Services, TRI Funding II [specify
Series], or at any other address previously furnished in writing to the
Issuer, the Noteholders and the Servicer; or
(b) to the Issuer at TRI Funding II, Inc., 3250 Lakeport
Boulevard, Klamath Falls, Oregon 97601 (facsimile number (503)
885-7454), Attention: Treasurer, or at any other address previously
furnished in writing to the Trustee, the Noteholders and the Servicer
by the Issuer; or
(c) to the Servicer at Trendwest Resorts, Inc., 12301 N.E. 10th Place,
Bellevue, Washington 98005 (facsimile number (425) 990-2302), Attention:
Executive Vice President, or at any other address previously furnished in
writing to the Trustee, the Noteholders and the Issuer; or
(d) to Fitch at One State Street Plaza, New York, New York
10004 (facsimile number (212) 480-4438), Attention: Asset-Backed
Securities, or at any other address previously furnished in writing to
the Trustee , the Noteholders or the Issuer.
Section 13.03 Notices and Other Documents to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of any event, such
notice shall be in writing and sent (i) by telefacsimile if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (ii) by registered or certified mail with
return receipt requested (postage prepaid), or (iii) by a recognized overnight
delivery service (with charges prepaid). Any such notice to a Noteholder or its
nominee must be sent (i) to such Person at the address specified for such
communications in the Note Register, or at such other address as the Noteholder
shall have specified to the Trustee in writing and (ii) if specified, to such
other Person as shall be identified in writing to the Trustee by each Noteholder
or its nominee.
Notice under this Section 13.03 will be deemed to be given only when
actually received.
(b) Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(c) Any reports, documents or other communications other than notices
to be sent to Noteholders may be telecopied or mailed, first-class postage
prepaid and shall be addressed to the Noteholders and their nominees and
designees, if applicable, as set forth in paragraph (a) above.
Section 13.04 Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 13.05 Successors and Assigns. All covenants and agreements
in this Indenture by the Issuer shall bind its successors and assigns, whether
so expressed or not.
Section 13.06 Separability. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or unpaired thereby.
Section 13.07 Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto, the Noteholders, and any Paying Agent which may be appointed pursuant to
the provisions hereof, and any of their successors hereunder, any benefit or any
legal or equitable right, remedy or claim under this Indenture or under the
Notes.
Section 13.08 Legal Holidays. In any case in which the date of any
Payment Date or the Stated Maturity of any Note shall not be a Business Day,
then (notwithstanding any other provision of the Notes or this Indenture)
payment of principal, interest, or premium, if any, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the nominal date of any such Stated Maturity or Payment
Date and, assuming such payment is actually made on such subsequent Business
Day, no additional interest shall accrue on the amount so paid for the period
from and after any such nominal date.
Section 13.09 Governing Law. This Indenture and each Note shall be
construed in accordance with and governed by the internal laws of the State of
New York applicable to agreements made and to be performed therein, without
regard to the conflict of laws provisions of any State.
Section 13.10 Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 13.11 Obligation. No recourse may be taken, directly or
indirectly, against any incorporator, subscriber to the capital stock,
stockholder, partner, employee, officer or director of the Issuer or of any
predecessor or successor of the Issuer with respect to the Issuer's obligations
on the Notes or under this Indenture or any certificate or other writing
delivered in connection herewith; provided, however, that this Section 13.11
shall not protect any Person from his, her or its own fraud or willful
misconduct or from any liability that such Person may incur in another capacity
under the Transaction Documents.
Section 13.12 Compliance Certificates and Opinions. Upon any
application, order or request by the Issuer or the Servicer to the Trustee to
take any action under any provision of this Indenture for which a specific
request is required under this Indenture, the Issuer or the Servicer, as
applicable, shall furnish to the Trustee an Officer's Certificate of the Issuer
or the Servicer, as applicable, stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with, except that in the case of any such application or request as to
which the furnishing of a different certificate is specifically required by any
provision of this Indenture relating to such particular application or request,
no additional certificate need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate
or opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(b) 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;
(c) a statement that, in the opinion of each such individual,
such individual has made such examination or investigation as is
necessary to enable such individual to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 13.13 Effective Date of Transactions. This Indenture and the
other Transaction Documents shall be deemed to be effective and shall be valid
and enforceable as of the Closing Date, except that each Series Supplement shall
be effective, valid and enforceable as of the related Series Closing Date.
Section 13.14. Duties of the Parties. This Indenture has been drafted
with the intent that one Person shall serve as Servicer, one Person shall serve
as Trustee, and one Person shall serve as Subservicer with respect to all Series
of Notes Outstanding. However, any Series may have a different Person serving as
Servicer, Trustee or Subservicer because of a resignation or removal of such
Person with respect to such Series. References to each of the Servicer, the
Trustee and the Subservicer shall be read so that each such Person shall have
the rights and duties of the Servicer, Trustee or Subservicer, as the case may
be, only with respect to each Series for which such Person serves in such role.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Servicer and the Trustee have
caused this Indenture to be duly executed by the persons thereunto duly
authorized as of the day and year first above written.
TRI FUNDING II, INC., Issuer
By:
Name:
Title:
TRENDWEST RESORTS, INC., Servicer
By:
Name:
Title:
LASALLE NATIONAL BANK, Trustee
By:
Name:
Title:
<PAGE>
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===============================================================================
EXHIBIT A
FORM OF INVESTMENT LETTER
_______________, 19__
[Issuer]
[TFI]
[Servicer]
[Trustee]
[Transferor]
Re: TRI Funding II, Inc. Receivables-Backed Notes, Series ___
[Class___] No. R_________ (the "Note")
------------------------------------------- Dear Sirs:
The undersigned hereby certifies with respect to the above-referenced
notes (the "Notes") on behalf of the purchaser named below (the "Purchaser") as
follows:
1. I __________________, am the chief financial officer, a person
fulfilling an equivalent function or other executive officer of the
Purchaser.
2. I am familiar with the provisions of Rule 144A ("Rule
144A") under the Securities Act of 1933, as amended (the "1933 Act")
and Rule 3(c)(7) ("Rule 3(c)(7)") under the Investment Company Act of
1940, as amended (the "1940 Act").
3. The Purchaser is a "qualified institutional buyer," as defined
in Rule 144A, and a "qualified purchaser," as used in Rule 3(c)(7).
4. The Purchaser is aware that the addressees may rely on
the exemption from the registration requirements of the 1933 Act
provided by Rule 144A and on the exemption from the investment company
registration requirements of the 1940 Act provided by Rule 3(c)(7).
5. The Purchaser acknowledges that the Purchaser has (i)
received such information regarding the issuer of the Notes as the
Purchaser may require pursuant to Rule 144A or (ii) the Purchaser has
determined not to request such information.
6. The Purchaser understands that the Notes are being issued
only in transactions not involving any public offering within the
meaning of the 1933 Act.
7. The Purchaser acknowledges that transfer of a Note can
only be effected in accordance with the Indenture executed and
delivered in connection with the issuance of the Notes.
8. The Purchaser warrants and represents to, and covenants
with, TFI, the Servicer, the Trustee and the Issuer that either: (A)
the Purchaser (i) is not an "employee benefit plan" within the meaning
of section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or a "plan" within the meaning of section
4975(e)(1) of the Internal Revenue Code of 1986 ("Code") (any such plan
or employee benefit plan, a "Plan"), and (ii) the Purchaser is not
acquiring (or considered to be acquiring) the Note with the assets of
any entity whose underlying assets include the assets of a Plan by
reason of such a Plan's investment in such entity, or (B) the Purchaser
is an insurance company that is acquiring the Note for its own account,
with its general corporate assets and not with the assets of a
"separate account," within the meaning of Section 3(17) of ERISA, or
(B) the Prospective Owner is an insurance company that is acquiring the
Note for its own account, with its general corporate assets and not
with the assets of a "separate account" within the meaning of Section
3(17) of ERISA and the conditions of Prohibited Transaction Class
Exemption 83-1 and/or Class Exemption 95-60 have been satisfied by such
Prospective Owner, or (C) the Prospective Owner is an insurance company
that is acquiring the Note with the assets of a separate account within
the meaning of Section 3(17) of ERISA and the conditions of Prohibited
Transaction Class Exemption 90-1 have been satisfied by such
Prospective Owner, or (D) the Prospective Owner is a bank collective
investment fund and the conditions of Prohibited Transaction Class
Exemption 91-38 have been satisfied by such Prospective Owner.
The representations and warranties contained herein shall be binding
upon the heirs, executors, administrators and other successors of the
undersigned. If there is more than one signatory hereto, the obligations,
representations, warranties and agreements of the undersigned are made jointly
and severally.
Executed at _________________________, ____________________, this ____
day of ______________, 19__.
- -------------------------------- ----------------------------------------
Purchaser's Name and Title (Print) Signature of Purchaser
- --------------------------------
Address of Purchaser
- --------------------------------
Purchaser's Taxpayer
Identification or Social
Note Number
<PAGE>
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==============================================================================
EXHIBIT B
FORM OF SUPPLEMENT FOR GRANT OF INTERESTS IN
SUBSTITUTE CONTRACTS AND UPGRADE CONTRACTS
Pursuant to Section 4.03(e) and Section 4.03(g) of the Indenture, dated
as of March 1, 1998, among TRI Funding II, Inc. (the "Issuer"), Trendwest
Resorts, Inc. (the "Servicer") and LaSalle National Bank, as Trustee (the
"Trustee"), (such Indenture as amended and supplemented from time to time, the
"Indenture"), attached hereto as Annex I is a supplement to Schedule A of the
Series Supplement for the Issuer's Receivables-Backed Notes, Series ______,
which includes information regarding certain interests in certain Contracts, the
related Receivables and the related Credits that are hereby Granted by the
Issuer to the Trustee in accordance with the Indenture. For purposes of this
Supplement, all defined terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Indenture.
Dated:
TRENDWEST FUNDING II, INC.
By
Name:
Title:
<PAGE>
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-1-
===============================================================================
ANNEX I
SUPPLEMENT FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
<PAGE>
===============================================================================
===============================================================================
EXHIBIT C
CERTIFICATE OF ISSUER AND SERVICER
PURSUANT TO SECTION 4.04(C) OF THE INDENTURE
Each of the undersigned hereby certify on behalf of TRI Funding II,
Inc. (the "Issuer") and Trendwest Resorts, Inc. (the "Servicer"), respectively,
I have read Section 4.04(c) of the Indenture dated as of March 1, 1998 (the
"Indenture"), among the Issuer, the Servicer and LaSalle National Bank, as
Trustee (the "Trustee"), together with the definitions contained elsewhere in
the Indenture relating to such Section, and further, as of the date hereof that
all conditions precedent provided in the Section 4.04(c) relating to the release
of collateral from the Series _____ Trust Estate for inclusion in the Series
_____ Trust Estate have been complied with.
IN WITNESS WHEREOF, I have hereunto set my hand, this ____ day of
____________, _______.
TRI FUNDING II, INC., as Issuer
By
Name:_______________________________________________________
Title:______________________________________________________
TRENDWEST RESORTS, INC., as Issuer
By
Name:_______________________________________________________
Title:______________________________________________________
================================================================================
SERIES 1998-1 SUPPLEMENT
Dated as of March 1, 1998
to
INDENTURE
Dated as of March 1, 1998
among
TRI FUNDING II, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer")
and
LASALLE NATIONAL BANK
("Trustee")
$125,000,000 6.88% Receivables-Backed Notes, Series
1998-1, Class A $5,434,485 7.98% Receivables-Backed
Notes, Series 1998-1, Class B
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
Parties.....................................................................1
Preliminary Statement.......................................................1
Granting Clause.............................................................1
ARTICLE ONE DEFINITIONS......................................2
Section 1.01 Definitions.........................................2
ARTICLE TWO FORM OF SERIES 1998-1 NOTES......................5
Section 2.01 Form of the Series 1998-1 Notes.....................5
ARTICLE THREE PRINCIPAL TERMS OF THE SERIES 1998-1 NOTES.......5
Section 3.01 Principal Terms of the Series 1998-1 Notes..........5
ARTICLE FOUR REPRESENTATIONS, WARRANTIES AND COVENANTS........6
Section 4.01 Representations and Warranties......................6
Section 4.02 Covenants...........................................7
ARTICLE FIVE MONTHLY DISTRIBUTIONS; RESERVE ACCOUNT...........7
Section 5.01. Monthly Distributions...............................7
Section 5.02. Reserve Account.....................................9
ARTICLE SIX SALE OF SERIES TRUST ESTATE.....................11
Section 6.01. Disbursements from Sales...........................11
ARTICLE SEVEN PROVISIONS OF GENERAL APPLICATION...............12
Section 7.01 Ratification of Indenture..........................12
Section 7.02 Amendments.........................................12
Section 7.03 Effect of Headings and Table of Contents...........13
Section 7.04 Governing Law......................................13
Section 7.05 Counterparts.......................................13
Section 7.06 Initial Purchasers.................................13
Signature..................................................................14
<PAGE>
SCHEDULE A Series Contract Schedule
SCHEDULE B Pool Information
EXHIBIT A-1 Form of Series 1998-1 Class A Note
EXHIBIT A-2 Form of Series 1998-1 Class B Note
EXHIBIT B Form of Monthly Servicer's Report
<PAGE>
==============================================================================
==============================================================================
SERIES 1998-1 SUPPLEMENT, dated as of March 1, 1998 (herein, as amended
and supplemented from time to time, called this "Series 1998-1 Supplement"),
among TRI FUNDING II, INC., a Delaware corporation (herein, together with its
permitted successors and assigns, called the "Issuer"), TRENDWEST RESORTS, INC.,
an Oregon corporation, as servicer (herein, together with its permitted
successors and assigns, called the "Servicer"), and LASALLE NATIONAL BANK, as
trustee (the "Trustee").
PRELIMINARY STATEMENT
The Issuer, the Servicer and the Trustee have entered into an Indenture
dated as of March 1, 1998 (the "Indenture"). Section 9.01 of the Indenture
provides, among other things, that the Issuer, the Servicer and the Trustee may
enter into indentures supplemental to the Indenture for, among other things, the
purpose of establishing the form or terms of the Notes of any Series as
permitted in Sections 3.01 and 4.01 of the Indenture. In connection therewith,
the Issuer has duly authorized the execution and delivery of this Series 1998-1
Supplement and the issuance of two classes of a Series of Notes designated as
the "6.88% Receivables-Backed Notes, Series 1998-1, Class A" (the "Class A
Notes") and the "7.98% Receivables-Backed Notes, Series 1998-1, Class B" (the
"Class B Notes" and, together with the Class A Notes, the "Series 1998-1
Notes"). The Class A Notes are limited in aggregate principal amount to
$125,000,000, and the Class B Notes are limited in aggregate principal amount to
$5,434,485, all as set forth in this Series 1998-1 Supplement.
All conditions have been complied with, all actions have been taken and
all things necessary to make this Series 1998-1 Supplement a valid agreement of
the Issuer, the Servicer and the Trustee in accordance with its terms and the
terms of the Indenture have been done.
GRANTING CLAUSE
To secure the payment of the principal of and interest on the Series
1998-1 Notes in accordance with their terms, the payment of all of the sums
payable under the Indenture and this Series 1998-1 Supplement with respect to
the Series 1998-1 Notes or otherwise payable to the Holders of such Notes and
the performance of the covenants contained in the Indenture and this Series
1998-1 Supplement with respect to the Series 1998-1 Notes, the Issuer hereby
Grants to the Trustee, solely in trust and as collateral security as provided in
the Indenture and this Series 1998-1 Supplement, for the benefit of the Holders
of the Notes of the Series 1998-1 Notes, all of the Issuer's rights, title and
interest in and to the following whether now owned or hereafter acquired and any
and all benefits accruing to the Issuer from: (a) the Receivables relating to
the Contracts listed on the Series Contract Schedule attached as Schedule A
hereto or on any supplement to such Series Contract Schedule pursuant to Section
4.03 of the Indenture, including all proceeds of such Receivables and all
payments received on or with respect to such Receivables and due after the
Series Cut-Off Date (or the date of transfer to the Issuer in the case of
Receivables relating to Substitute Contracts and Upgrade Contracts related to
the Series 1998-1 Notes); (b) the Issuer's rights and interests in the related
Contracts and the related Credits, including all proceeds of such Contracts and
the related Credits and all payments received on or with respect to such
Contracts and the related Credits and due after the Series Cut-Off Date; (c) the
related Contract Files and the related Custodian Files; (d) all amounts from
time to time on deposit in the Series 1998-1 Collection Account, the Series
1998-1 Distribution Account and the Series 1998-1 Reserve Account (including any
Eligible Investments and other property in such accounts); and (e) proceeds of
the foregoing (including, but not by way of limitation, all cash proceeds,
accounts, accounts receivable, notes, drafts, acceptances, chattel paper,
checks, deposit accounts, insurance proceeds, condemnation awards, rights to
payment of any and every kind, and other forms of obligations and receivables
which at any time constitute all or part or are included in the proceeds of any
of the foregoing) (all of the foregoing, together with the interests, rights and
properties Granted by the Issuer to support the Series 1998-1 Notes pursuant to
the Indenture, the "Series 1998-1 Collateral" or the "Series 1998-1 Trust
Estate").
ARTICLE ONEDEFINITIONS
Section 1.01 Definitions. Except as otherwise expressly provided
herein or unless the context otherwise requires, the following terms have the
respective meanings set forth below for all purposes of this Series 1998-1
Supplement and the Series 1998-1 Notes, and the definitions of such terms are
equally applicable both to the singular and plural forms of such terms. Each
term defined herein shall relate only to the Series 1998-1 Notes and no other
Series of Notes issued under the Indenture. Capitalized terms used herein but
not otherwise defined shall have the respective meanings assigned to such terms
in the Indenture.
"Cash Accumulation Event": The occurrence of any of the following
events or conditions: (i) as of any Calculation Date, the average Delinquency
Level for the immediately preceding three Due Periods ending on such Calculation
Date is greater than or equal to 6.67%, (ii) as of any Calculation Date, the
average Default Rate for the immediately preceding three Due Periods ending on
such Calculation Date is greater than or equal to 0.6%.
"Cash Accumulation Event Period": Each period commencing at the
beginning of a Due Period in which any Cash Accumulation Event occurs and ending
immediately prior to the beginning of the first subsequent Due Period during
which no Cash Accumulation Event occurs. For purposes of this definition, a Cash
Accumulation Event shall be deemed to occur during a Due Period if as of the
Calculation Date occurring on the last day of such Due Period there is an
occurrence or existence of a Cash Accumulation Event.
"Class": Any of the Class A Notes and Class B Notes of the Series 1998-1
Notes.
"Class A Note Interest Rate": 6.88% per annum.
"Class B Note Interest Rate": 7.98% per annum.
"Class A Principal Distribution Amount": With respect to each Payment
Date, (a) for any Payment Date prior to the Stated Maturity, an amount equal to
92% of the sum (without duplication) of (i) the principal portion of the amounts
collected by or on behalf of the Issuer in the immediately preceding Due Period
attributable to (A) payments by or on behalf of each Obligor of amounts owed on
each Receivable supporting the Series 1998-1 Notes, (B) Residual Proceeds and
Recoveries related to each such Receivable and (C) payments of Purchase Price by
TFI, the Issuer or Trendwest related to each such Receivable, and (ii) the
Collateral Value as of the related Calculation Date of any Contract related to
each such Receivable that became a Defaulted Contract in the immediately
preceding Due Period; (b) for any Payment Date on which the Principal Shortfall
Amount is greater than zero, the amount set forth in clause (a) above plus an
amount equal to the Principal Shortfall Amount relating to the Class A Notes and
(c) on the Stated Maturity, an amount equal to the aggregate principal amount of
Class A Notes Outstanding as of such date; provided, however, any payments that
are prepayments of principal made in connection with an Upgrade in accordance
with the Transaction Documents shall not be included in the determination of the
amount in clause (a) hereof.
"Class B Principal Distribution Amount": With respect to each Payment
Date, (a) for any Payment Date prior to the Stated Maturity, an amount equal to
4% of the sum (without duplication) of (i) the principal portion of the amounts
collected by or on behalf of the Issuer in the immediately preceding Due Period
attributable to (A) payments by or on behalf of each Obligor of amounts owed on
each Receivable supporting the Series 1998-1 Notes, (B) Residual Proceeds and
Recoveries related to each such Receivable and (C) payments of Purchase Price by
TFI, the Issuer or Trendwest related to each such Receivable, and (ii) the
Collateral Value as of the related Calculation Date of any Contract related to
each such Receivable that became a Defaulted Contract in the immediately
preceding Due Period; (b) for any Payment Date on which the Principal Shortfall
Amount is greater than zero, the amount set forth in clause (a) above plus an
amount equal to the Principal Shortfall Amount relating to the Class B Notes and
(c) on the Stated Maturity, an amount equal to the aggregate principal amount of
Class B Notes Outstanding as of such date; provided, however, any payments that
are prepayments of principal made in connection with an Upgrade in accordance
with the Transaction Documents shall not be included in the determination of the
amount in clause (a) hereof.
"Controlling Class": With respect to the Series 1998-1 Notes, the Class A
Notes until the Class A Notes are paid in full, then the Class B Notes.
"Initial Aggregate Collateral Value": $135,869,728.73.
"Initial Payment Date": April 15, 1998, the first Payment Date following
the Series Closing Date relating to the Series 1998-1 Notes.
"Note Interest Rate": With respect to the Class A Notes, 6.88% per annum,
and, with respect to the Class B Notes, 7.98% per annum.
"Note Purchase Agreements": Each of the Note Purchase Agreements, dated as
of March 1, 1998, between the Issuer and the purchasers of the Series 1998-1
Notes named therein.
"Principal Distribution Amount": With respect to the Class A Notes, the
Class A Principal Distribution Amount, and, with respect to the Class B Notes,
Class B Principal Distribution Amount.
"Reserve Account Required Balance": As of any Payment Date, an amount equal
to the greatest of (i) the product of (a) the sum (expressed as a percentage) of
(1) 2% plus (2) the product of .25% and the total number of times a Cash
Accumulation Event has occurred (for the purposes of this definition, a Cash
Accumulation Event shall be deemed to have occurred only once for any period of
consecutive Due Periods occurring during a single Cash Accumulation Event
Period) and (b) the principal balance of the Series 1998-1 Notes Outstanding as
of such Payment Date (after any distributions made pursuant to Section 12.02(d)
hereof on such date), (ii) $500,000 and (iii) during a Cash Accumulation Event
Period, $500,000,000.
"Reserve Account Standard Balance": As of any Payment Date, an amount equal
to the Reserve Account Required Balance without giving effect to clause (iii)
thereof.
"Securities Act": Securities Act of 1933, as amended from time to time.
"Series Closing Date": With respect to the Series 1998-1 Notes, March 12,
1998.
"Series Cut-Off Date": With respect to the Series 1998-1 Notes, March 2,
1998.
"Series 1998-1 Collection Account": The Collection Account established for
the Series 1998-1 Notes pursuant to Section 12.02 of the Indenture.
"Series 1998-1 Distribution Account": The Distribution Account related to
the Series 1998-1 Notes pursuant to Section 12.02 of the Indenture.
"Series 1998-1 Monthly Servicer's Report": The Monthly Servicer's Report
relating to the Series 1998-1 Notes, a form of which is attached as Exhibit B
hereto.
"Series 1998-1 Reserve Account": The Reserve Account established for the
Series 1998-1 Notes pursuant to Section 12.03 of the Indenture.
"Stated Maturity": April 15, 2009.
"Trigger Event": Any of the following events or conditions: (1) if, as of
any Calculation Date, the aggregate Collateral Value of Contracts that are
Delinquent Contracts is greater than or equal to 10% of the Aggregate Collateral
Value as of the immediately preceding Calculation Date; (2) if, as of any
Calculation Date, the aggregate Collateral Value of Defaulted Contracts that
became Defaulted Contracts in the related Due Period is greater than or equal to
0.80% of the Aggregate Collateral Value as of the immediately preceding
Calculation Date; (3) an Event of Default or Servicer Event of Default has
occurred and is continuing; (4) (a) WorldMark voluntarily incurs or is any time
voluntarily liable for any debt, or any of its property voluntarily is or
voluntarily becomes subject to any Liens (other than (i) utility or similar
easements or licenses which do not relate to borrowings by WorldMark or (ii)
Liens that in the aggregate for all properties do not exceed $100,000), or (b)
WorldMark involuntarily incurs or is any time involuntarily liable for any debt,
or any of its property involuntarily is or involuntarily becomes subject to any
Liens (other than utility or similar easements or licenses which do not relate
to borrowings by WorldMark) that individually or in the aggregate (with respect
to all such debt and the obligations secured by all such Liens) exceed
$1,000,000; (5) WorldMark sells, leases or otherwise transfers voluntarily or
otherwise, any of its real estate properties or any interest therein so that, in
the aggregate, there is a net decrease in Credits available for member use
greater than or equal to 10% from the number of Credits available for member use
on the Closing Date; (6) if on the Payment Date after the fifth anniversary of
the Closing Date, the aggregate principal amount of Notes Outstanding is greater
than $15,000,000; (7) WorldMark exchanges one of its present properties for
another property that is worth fewer Credits than the property so exchanged; or
(8) WorldMark has interests in units at fewer than 20 developed resort
properties.
"Trigger Event Period": Each period commencing at the beginning of a Due
Period in which any Trigger Event occurs or exists and ending immediately prior
to the beginning of the first subsequent Due Period that follows a period of six
consecutive Due Periods during which no Trigger Event occurs or exists.
ARTICLE TWO FORM OF SERIES 1998-1 NOTES
Section 2.01 Form of the Series 1998-1 Notes. The Class A Notes and
the Class B Notes shall be in substantially the form set forth in Exhibit A-1
and Exhibit A-2, respectively, to this Series 1998-1 Supplement as such forms
may be completed pursuant to Section 3.01 hereof, the terms of which Exhibits
are herein incorporated by reference and which are made a part of this Series
1998-1 Supplement, with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by the Indenture and by this
Series 1998-1 Supplement.
ARTICLE THREE PRINCIPAL TERMS OF THE SERIES 1998-1 NOTES
Section 3.01 Principal Terms of the Series 1998-1 Notes. The
Principal Terms of the Series 1998-1 Notes shall be as follows:
(a) There is hereby created a Series of Notes to be issued in two classes
under the Indenture and this Series 1998-1 Supplement designated as the "6.88%
Receivables-Backed Notes, Series 1998-1, Class A" and the "7.98%
Receivables-Backed Notes, Series 1998-1, Class B," collectively being the Series
1998-1 Notes herein referred to.
(b) The Series 1998-1 Notes shall constitute a single Series of the Notes
under the Indenture, which Series is limited in aggregate principal amount to
$130,434,485, consisting of the Class A Notes, which Class is limited in
aggregate principal amount to $125,000,000, and the Class B Notes, which Class
is limited in aggregate principal amount to $5,434,485 (except for Series 1998-1
Notes of each Class authenticated and delivered upon registration of transfer or
in exchange for or in lieu of, other Series 1998-1 Notes of such Class pursuant
to Sections 3.04, 3.05, 3.06 or 9.05 of the Indenture).
(c) The Series 1998-1 Notes shall be originally issued on the Series
Closing Date. The Class A Notes shall bear interest monthly at the rate of 6.88%
per annum and the Class B Notes shall bear interest monthly at the rate of 7.98%
per annum, payable with respect to each Class from and including the Series
Closing Date or the most recent Payment Date to which interest has been paid, on
each Payment Date, commencing on the Initial Payment Date.
ARTICLE FOUR REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01 Representations and Warranties. The Issuer hereby makes the
following representations and warranties as of the Series Closing Date for the
benefit of the Holders of the Series 1998-1 Notes.
(a) No Untrue Statements of Material Fact. None of the information in the
Transaction Documents or in any other document, certificate, written statement,
report, financial statement or schedule furnished by or on behalf of the Issuer
in connection with the issuance of the Series 1998-1 Notes, contains any untrue
statement of a material fact, and all of such documents when read together, but
not independently, do not omit any statement of a material fact necessary in
order to make the statements contained therein not misleading.
(b) Private Offering by the Issuer. Neither the Issuer nor anyone acting on
its behalf has offered the Notes or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than the purchasers of the
Series 1998-1 Notes and not more than 49 other institutional investors. Neither
the Issuer nor anyone acting on its behalf has taken, or will take, any action
which would subject the issuance or sale of the Series 1998-1 Notes to the
registration requirement of Section 5 of the Securities Act.
(c) Pool Information. As of the Series Cut-Off Date, the information set
forth on Schedule B hereto is true and correct.
(d) Number of Credits. As of February 15, 1998, the aggregate number of
Credits was 411,470,000.
Section 4.02 Covenants. (a) The Issuer will, upon receipt of a written
request from any Holder of a Series 1998-1 Note, promptly provide to such
Holder, or any prospective purchaser of such Series 1998-1 Note designated by
such Holder, any information necessary to permit compliance with Rule 144A under
the Securities Act, or any successor rule.
(b) Each of the Issuer, the Servicer and the Trustee shall deliver to
Structured Finance Advisors, Inc. ("SFA"), 17 Talcott Notch Road, Farmington,
Connecticut 06032, Attention: Asset Manager, copies of all notices, reports and
other documents that it is required to deliver to the Rating Agency or the
Holders of the Series 1998-1 Notes pursuant to the Servicing Agreement and the
Indenture.
ARTICLE FIVE MONTHLY DISTRIBUTIONS; RESERVE ACCOUNT
Section 5.01. Monthly Distributions. On each Payment Date, if either no
Default or Event of Default shall have occurred and be continuing with respect
to the Series 1998-1 Notes or a Default or Event of Default shall have occurred
and be continuing with respect to such Notes but the entire unpaid principal
amount of such Notes shall not have been declared, have automatically become or
otherwise have become, due and payable pursuant to Section 6.02 of the
Indenture, then on such Payment Date, after making all transfers and deposits
into the Series 1998-1 Distribution Account from the Series 1998-1 Collection
Account pursuant to Section 12.02(a) of the Indenture or from the Series 1998-1
Reserve Account pursuant to clauses (i) and (iii) of Section 5.02 hereof, the
Trustee shall withdraw from the Series 1998-1 Distribution Account (other than
amounts representing payments of Receivables due after the related Calculation
Date immediately preceding such Payment Date), and shall make the following
disbursements in the following order in accordance with the provisions of and
instructions on the Series 1998-1 Monthly Servicer's Report; provided that the
Trustee shall, to the extent funds are available in the Series 1998-1
Distribution Account, make payments under clauses (i) and (ii) below and
interest payments based on the outstanding principal balance of the Series
1998-1 Notes (to the extent it can do so without withdrawing funds from the
Series 1998-1 Reserve Account) even if it shall not have received the Series
1998-1 Monthly Servicer's Report:
(i) to pay to the Trustee the Trustee Fee relating to the Series 1998-1
Notes and any expenses incurred by the Trustee relating to such Series in
accordance with Section 7.07(ii) of the Indenture then due;
(ii) to pay to the Servicer (during a Cash Accumulation Event Period, or
during a Trigger Event Period or if such Servicer is not the initial Servicer or
an Affiliate thereof): (A) the Servicer Fee relating to the Series 1998-1 Notes;
and (B) the amounts necessary to reimburse the Servicer and any successor
Servicer as provided in Section 3.09 of the Servicing Agreement for reasonable
costs and expenses incurred by the Servicer relating to such Series (including
reasonable attorney's fees and out-of-pocket expenses) in connection with the
realization, attempted realization or enforcement of rights and remedies upon
Defaulted Contracts related to such Series and from amounts received as
Recoveries from such Defaulted Contracts;
(iii) to pay the aggregate interest due on the Outstanding Class A Notes on
that Payment Date and any overdue interest, to be applied as provided in Section
3.07 of the Indenture;
(iv) to pay the aggregate interest due on the Outstanding Class B Notes on
that Payment Date and any overdue interest, to be applied as provided in Section
3.07 of the Indenture;
(v) to pay the Class A Principal Distribution Amount for all Outstanding
Class A Notes on that Payment Date, to be applied to the payment of Class A Note
principal as provided in Section 3.07 of the Indenture;
(vi) on each Payment Date relating to a Due Period occurring during a
Trigger Event Period, apply any remaining funds to the payment of principal on a
pro rata basis to the Holders of the Class A Notes Outstanding until the
principal outstanding on such Notes is paid in full (after taking into account
the payments of Note principal made pursuant to clause (v) above), then to the
Holders of the Class B Notes Outstanding until the principal owed on such Notes
is paid in full;
(vii) to deposit into the Series 1998-1 Reserve Account (A) an amount
necessary to bring the balance therein to an amount equal to the Reserve Account
Required Balance or (B) on each Payment Date relating to a Due Period occurring
during a Cash Accumulation Event Period, all remaining funds in the Distribution
Account;
(viii) to pay the Class B Principal Distribution Amount for all Outstanding
Class B Notes on that Payment Date, to be applied to the payment of Class B Note
principal as provided in Section 3.07 of the Indenture;
(ix) to pay to the Servicer (so long as the initial Servicer or an
Affiliate thereof is the Servicer and without duplication of amounts paid to
such Servicer pursuant to clause (ii) of this Section 5.01): (A) the Servicer
Fee relating to the Series 1998-1 Notes; and (B) the amounts necessary to
reimburse the Servicer and any successor Servicer as provided in Section 3.09 of
the Servicing Agreement for reasonable costs and expenses incurred by the
Servicer relating to such Series (including reasonable attorney's fees and
out-of-pocket expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted Contracts
related to such Series and from amounts received as Recoveries from such
defaulted Contracts;
(x) to reimburse the Noteholders for any reasonable costs and expenses
incurred in connection with any enforcement action with respect to this
Indenture or the Notes or any other Transaction Documents;
(xi) to pay to TFI the interest due TFI under the Subordinated Note
relating to the Series 1998-1 Notes;
(xii) to pay to TFI, to the extent available, the principal due to TFI
under the Subordinated Note relating to the Series 1998-1 Notes;
(xiii) to pay to the Trustee any other amounts due to the Trustee with
respect to the Series 1998-1 Notes as expressly provided herein and in the
Servicing Agreement;
(xiv) to pay to the Servicer any other amounts due the Servicer with
respect to the Series 1998-1 Notes as expressly provided herein and in the
Servicing Agreement; and
(xv) to remit any excess funds to or at the direction of the Issuer.
Prior to each Payment Date, the Trustee shall review the Monthly Servicer's
Report relating to the Series 1998-1 Notes and shall determine that the Servicer
has properly calculated the aggregate amounts that are to be distributed
pursuant to clauses (i), (ii)(A), (iii), (iv), (v), (vi), (vii) and (viii) of
this Section 5.01 on such Payment Date.
The Trustee, based solely on the information set forth on the Monthly
Servicer's Report, shall cause the funds necessary to make the distributions set
forth in this Section 5.01 to be transferred into the Series 1998-1 Distribution
Account from funds in the Series 1998-1 Collection Account on the Business Day
immediately preceding the related Payment Date.
The foregoing provisions of paragraph 5.01 notwithstanding, any monies
deposited in the Series 1998-1 Distribution Account for purposes of redeeming
the Series 1998-1 Notes pursuant to Article Ten of the Indenture shall, subject
to Section 11.02(o) of the Indenture, remain in the Series 1998-1 Distribution
Account until used to redeem such Notes.
Section 5.02. Reserve Account. Disbursements from the Series 1998-1 Reserve
Account shall be made, to the extent funds therefor are available, only as
follows:
(i) in the event that the amount in the Series 1998-1 Collection Account at
1:00 p.m., Chicago time, on the Determination Date immediately preceding any
Payment Date (other than amounts representing payments of Receivables due after
the related Calculation Date immediately preceding such Payment Date) is less
than the sum of the amounts required to be transferred to the Series 1998-1
Distribution Account on the related Remittance Date for distribution pursuant to
clauses (i) through (v) of Section 5.01 hereof, the Trustee shall, in accordance
with the Series 1998-1 Monthly Servicer's Report, withdraw funds from the Series
1998-1 Reserve Account on or prior to 4:00 p.m., Chicago time, on the Business
Day immediately preceding such Payment Date to the extent necessary to make such
payments on such Payment Date and deposit such funds into the Series 1998-1
Distribution Account;
(ii) subject to subparagraphs (iii), (iv) and (v) of this Section 5.02 and
Section 5.01, in the event that on any Payment Date the balance in the Series
1998-1 Reserve Account equals an amount greater than the Reserve Account
Required Balance (after giving effect to the distributions listed in Section
5.01(i) through (v) hereof on such Payment Date in accordance with the Series
1998-1 Monthly Servicer's Report), the Trustee shall withdraw funds in the
Series 1998-1 Reserve Account in such amount so that the remaining amount in the
Series 1998-1 Reserve Account after such withdrawal will equal the Reserve
Account Required Balance, and the Trustee shall deposit such withdrawn funds
into the Distribution Account for distribution in accordance with Section 5.01
hereof;
(iii) in the event that on any Payment Date a Trigger Event has occurred
and is continuing with respect to the Series 1998-1 Notes, the Trustee shall,
but only at the direction of Holders of not less than 66-2/3% in principal
amount of the Controlling Class of the Series 1998-1 Notes Outstanding, withdraw
all funds from the Series 1998-1 Reserve Account (or any such lesser amount of
such funds as such Holders may direct) and deposit such funds into the Series
1998-1 Distribution Account for disbursement in accordance with the provisions
of Section 5.01 hereof;
(iv) subject to subparagraph (iii) of this Section 5.02, in the event that
on any Payment Date a Trigger Event has occurred and is continuing with respect
to the Series 1998-1 Notes at a time when the amount in the Series 1998-1
Reserve Account is greater than the Reserve Account Standard Balance, the
Trustee shall withdraw funds from the Series 1998-1 Reserve Account and deposit
such funds into the Series 1998-1 Distribution Account for disbursement in
accordance with the provisions of Section 5.01 hereof to the extent necessary so
that after such withdrawal the amount in the Series 1998-1 Reserve Account
equals the Reserve Account Standard Balance;
(v) in the event that a Cash Accumulation Event occurs with respect to the
Series 1998-1 Notes and is subsequently cured, the Trustee shall withdraw the
amount that is in the Series 1998-1 Reserve Account that is greater than the
Reserve Account Required Balance (after giving effect to the distributions
listed in clauses (i) through (v) of Section 5.01 on such Payment Date) and
distribute such amount pursuant to clauses (viii) through (xv) of Section 5.01,
in accordance with the Series 1998-1 Monthly Servicer's Report; and
(vi) on the Final Payment Date, to the extent any funds remain in the
Series 1998-1 Reserve Account after distributions pursuant to clauses (i)
through (v) of Section 5.01, such remaining amounts shall be used to pay the
amounts set forth in clauses (viii) through (xv) of Section 5.01 hereof.
ARTICLE SIX SALE OF SERIES TRUST ESTATE
Section 6.01. Disbursements from Sales. If the Series 1998-1 Notes have
been declared, have automatically become, or otherwise become due and payable
following an Event of Default and such declaration of automatic acceleration has
not been rescinded or annulled, any money collected by the Trustee with respect
to the Series 1998-1 Notes pursuant to Article Six of the Indenture or otherwise
and any other money that may be held thereafter by the Trustee as security for
the Series 1998-1 Notes, including without limitation the amounts in the Series
1998-1 Reserve Account, shall be applied in the following order, at the date or
dates fixed by the Trustee and, in case of the distribution of such money on
account of principal or interest, without presentation of any of the Series
1998-1 Notes:
FIRST: To the payment to the Trustee of the Trustee Fee with respect to the
Series 1998-1 Notes and its expenses then due and to the Trustee its costs
incurred in connection with enforcing the remedies provided for in Article Six
of the Indenture, in each case, with respect to such Series;
SECOND: To the payment of, if Trendwest or an Affiliate thereof is not the
Servicer, all amounts due the Servicer with respect to the Series 1998-1 Notes
pursuant to Section 3.09 of the Servicing Agreement and Section 5.01 hereof;
THIRD: To the payment of the amounts then due and unpaid upon the Class A
Notes for interest, with interest (to the extent such interest has been
collected by the Trustee or a sum sufficient therefor has been so collected and
payment thereof is legally enforceable at the respective rate or rates
prescribed therefor in such Notes) on overdue principal and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Notes for interest;
FOURTH: To the payment of the amounts then due and unpaid upon the Class B
Notes for interest, with interest (to the extent such interest has been
collected by the Trustee or a sum sufficient therefor has been so collected and
payment thereof is legally enforceable at the respective rate or rates
prescribed therefor in such Notes) on overdue principal and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Notes for interest;
FIFTH: To the payment of the remaining outstanding principal balance of the
Class A Notes ratably without preference or priority of any kind within such
Class;
SIXTH: To the payment of the remaining outstanding principal balance of the
Class B Notes ratably without preference or priority of any kind within such
Class;
SEVENTH: To the payment to the Trustee any other amounts due to the Trustee
with respect to the Series 1998-1 Notes as expressly provided in the Indenture,
herein or in the Servicing Agreement;
EIGHTH: To reimburse the Holders of the Class A Notes for any costs or
expenses incurred in connection with any enforcement action with respect to this
Indenture or such Notes or any other Transaction Document;
NINTH: To the payment of, if Trendwest or an Affiliate thereof is the
Servicer, all amounts due the Servicer with respect to the Series 1998-1 Notes
pursuant to Section 3.09 of the Servicing Agreement and Section 5.01 hereof;
TENTH: To reimburse the Holders of the Class B Notes for any costs or
expenses incurred in connection with any enforcement action with respect to this
Indenture or such Notes or any other Transaction Document; and
ELEVENTH: To the payment of any surplus to or at the written direction of
the Issuer or any other person legally entitled thereto.
ARTICLE SEVEN PROVISIONS OF GENERAL APPLICATION
Section 7.01 Ratification of Indenture. As supplemented by this Series
1998-1 Supplement, the Indenture is in all respects ratified and confirmed and
the Indenture as so supplemented by this Series 1998-1 Supplement shall be read,
taken and construed as one and the same instrument. In the event that any term
or provision contained herein shall conflict with or be inconsistent with any
term or provision contained in the Indenture, the terms and provisions of this
Series 1998-1 Supplement shall be controlling.
Section 7.02 Amendments to the Documents. With the consent of the Holders
of not less than 66-2/3% in principal amount of the Series 1998-1 Notes
Outstanding, by Act of said Holders delivered to the Issuer and the Trustee, the
Issuer, the Servicer and the Trustee may enter into an indenture or indentures
supplemental hereto or to the Indenture or amendments to the Servicing
Agreement, the Receivables Purchase Agreement, the Custodian Agreement or the
Sale Agreement for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of the Transaction Documents or of
modifying in any manner the rights of the Holders of the Notes of such Series
under the Indenture and this Series 1998-1 Supplement, provided, however, that
this provision shall in no way affect the requirement in Section 9.02 of the
Indenture that all of the affected Holders consent to certain amendments
specified in such Section. Notwithstanding the foregoing and anything contained
herein to the contrary, the Issuer may amend the Series Contract Schedule
attached hereto as Schedule A from time to time with a supplement, substantially
in the form of Exhibit B to the Indenture, in accordance with Section 4.03(e)
and Section 4.03(g) of the Indenture without the consent of the Holders of the
Series 1998-1 Notes.
Section 7.03 Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 7.04 Governing Law. This Series 1998-1 Supplement and each Series
1998-1 Note shall be construed in accordance with and governed by the internal
laws of the State of New York applicable to agreements made and to be performed
therein, without regard to the conflict of laws provisions of any State.
Section 7.05 Counterparts. This Series 1998-1 Supplement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 7.06 Initial Purchasers. The Trustee hereby acknowledges that it
has received and has reflected in the Note Register for the Series 1998-1 Notes
the information relating to the initial purchasers of the Series 1998-1 Notes
set forth in Annex 1 to the Note Purchase Agreements.
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Servicer and the Trustee have caused
this Series 1998-1 Supplement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first above written.
TRI FUNDING II, INC.
Issuer
By:
Name:
Title:
TRENDWEST RESORTS, INC.,
Servicer
By:
Name:
Title:
LASALLE NATIONAL BANK, Trustee
By:
Name:
Title:
<PAGE>
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EXHIBIT A
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EXHIBIT A-1
FORM OF SERIES 1998-1 CLASS A NOTE
<PAGE>
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EXHIBIT A
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EXHIBIT A-2
FORM OF SERIES 1998-1 CLASS B NOTE
<PAGE>
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EXHIBIT A
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EXHIBIT B
FORM OF SERIES 1998-1 MONTHLY SERVICER'S REPORT
<PAGE>
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EXHIBIT A
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SCHEDULE A
SERIES CONTRACT SCHEDULE
<PAGE>
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EXHIBIT A
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SCHEDULE B
POOL INFORMATION
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SERVICING AGREEMENT
among
TRI FUNDING II, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer" or "Trendwest")
and
SAGE SYSTEMS, INC.
("Subservicer")
and
LASALLE NATIONAL BANK, as Trustee
("Trustee")
Dated as of March 1, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE 1
DEFINITIONS...................................................................1
Section 1.01. Defined Terms..................................1
ARTICLE 2 SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS.......4
Section 2.01. Representations and Warranties............................4
Section 2.02. Covenants.................................................6
ARTICLE 3 ADMINISTRATION AND SERVICING OF CONTRACTS...............7
Section 3.01. Responsibilities of Servicer..............................7
Section 3.02. Standard of Care..........................................9
Section 3.03. Clearing Account, ACH Payments and Servicer Remittances...9
Section 3.04. Property Management......................................10
Section 3.05. Financing Statements.....................................11
Section 3.06. [Reserved.]..............................................11
Section 3.07. [Reserved.]..............................................11
Section 3.08. No Offset................................................11
Section 3.09. Servicing Compensation...................................11
Section 3.10. Substitution or Purchase of Contracts and Receivables....12
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS...............13
Section 4.01. Monthly Servicer's Reports..................................13
Section 4.02. Financial Statements; Certification as to Compliance; Notice of
Default.....................................................13
Section 4.03. Independent Accountants' Reports.....................15
Section 4.04. Access to Certain Documentation and Information......16
Section 4.05. Trustee to Cooperate.................................18
Section 4.06. Oversight of Servicing...............................18
ARTICLE 5 THE SERVICER, THE SUBSERVICER AND THE ISSUER......20
Section 5.01. Servicer and Subservicer Indemnification....................20
Section 5.02. Corporate Existence; Reorganizations........................20
Section 5.03. Limitation on Liability of the Servicer, the Subservicer and
Others..............................21
Section 5.04 The Servicer and Subservicer Not to Resign......................21
Section 5.05. Issuer Indemnification.........................................22
ARTICLE 6 SERVICING TERMINATION.............................22
Section 6.01. Servicer Events of Default...........................22
Section 6.02. Appointment of Successor Servicer....................25
Section 6.03. Notification to Noteholders..........................25
Section 6.04. Waiver of Past Defaults..............................26
Section 6.05. Effects of Termination of Servicer...................26
Section 6.06. No Effect on Other Parties...........................26
ARTICLE 7 THE SUBSERVICER...................................27
Section 7.01. Representations and Warranties.......................27
Section 7.02. Subservicer Events of Default........................28
Section 7.03. Appointment of Successor Subservicer.................29
Section 7.04. Notification to Noteholders..........................30
Section 7.05. Waiver of Past Defaults..............................30
Section 7.06. Effects of Termination of Subservicer................30
ARTICLE 8 MISCELLANEOUS PROVISIONS..........................31
Section 8.01. Termination of the Servicing Agreement...............31
Section 8.02. Amendments...........................................31
Section 8.03. Governing Law........................................32
Section 8.04. Notices, etc., to Trustee, Issuer, Servicer and
Subservicer..........................................32
Section 8.05. Notices and Other Documents to Noteholders; Waiver...33
Section 8.06. Severability of Provisions...........................33
Section 8.07. Binding Effect.......................................33
Section 8.08. Article Headings and Captions........................33
Section 8.09. Legal Holidays.......................................34
Section 8.10. Assignment for Security for the Notes................34
Section 8.11. No Servicing Assignment..............................34
Section 8.12. Counterparts.........................................34
Section 8.13. Duties of the Parties................................34
Signatures...................................................................35
EXHIBIT A -- Form of Report of Independent Accountants
EXHIBIT B -- Permitted Changes to Property Management Agreement
<PAGE>
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SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of March 1, 1998 (the "Agreement"),
by and among TRI FUNDING II, Inc., a Delaware corporation (herein, together with
its permitted successors and assigns, the "Issuer"), TRENDWEST RESORTS, INC., an
Oregon corporation, for itself (together with its successors and assigns,
"Trendwest") as servicer hereunder (herein, together with its permitted
successors and assigns, the "Servicer"), SAGE SYSTEMS, INC., a Washington
corporation, as subservicer hereunder (herein, together with its permitted
successors and assigns, the "Subservicer") and LASALLE NATIONAL BANK, as trustee
(herein, together with its permitted successors and assigns, the "Trustee")
under the Indenture (defined below).
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of March 1, 1998 (as
amended and supplemented from time to time, the "Indenture"), with the Trustee
and the Servicer, pursuant to which the Issuer intends to issue from time to
time in series its Receivables-Backed Notes (collectively, the "Notes").
The Issuer, Trendwest Resorts, Inc. (not as Servicer, but acting on its
own behalf, "Trendwest"), and Trendwest Funding II, Inc., a Delaware corporation
("TFI"), have entered into a Purchase and Sale Agreement, dated as of March 1,
1998 (as amended and supplemented from time to time, the "Sale Agreement"),
providing for, among other things, the sale by TFI to the Issuer of the
Purchased Assets, as defined in the Sale Agreement. Under the terms and
conditions set forth in the Indenture, the Issuer is and will be pledging such
Purchased Assets to the Trustee as security for the Notes. As a precondition to
the effectiveness of the Sale Agreement, the Sale Agreement requires that the
Servicer, the Subservicer, the Issuer and the Trustee enter into this Agreement
to provide for the servicing of the Purchased Assets.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Sale Agreement, and the Servicer and the
Subservicer agree that all covenants and agreements made by the Servicer and the
Subservicer herein with respect to the Purchased Assets shall also be for the
benefit and security of the Trustee and all Holders from time to time of the
Notes. For its services under this Agreement, the Servicer will receive a
Servicer Fee as provided herein and in the Indenture.
ARTICLE 1 DEFINITIONS
Section 1.01. Defined Terms. Except as otherwise specified or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such terms
and to the masculine, feminine and neuter genders of such terms. Capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Indenture.
"Clearing Account" shall mean the account established by the
Subservicer at the Clearing Account Bank, into which account collections with
respect to the Contracts will be deposited by the Subservicer.
"Clearing Account Bank" shall mean Commerce Bank of Washington (or an
affiliate thereof), and its successors and assigns.
"Collection Account Bank" shall mean Wells Fargo Bank (or an affiliate
thereof) and its successors or assigns.
"Contract Files" shall have the meaning specified in the Sale Agreement.
"Custodian Agreement" shall mean the Custodian Agreement, dated as of
March 1, 1998, among Sage Systems, Inc., as Custodian, the Trustee, the Issuer
and Trendwest, as amended and supplemented from time to time.
"Custodian Files" shall have the meaning specified in the Sale Agreement.
"Independent Accountants" shall mean KPMG Peat Marwick or another firm
of public accountants of nationally recognized standing (except that, with
respect to Section 4.03, Independent Accountants shall include Molatore, Peugh,
McDaniel, Scroggin & Co. LLP and its successors in interest); provided, that
such firm is independent with respect to the Servicer within the meaning of the
Securities Act of 1933, as amended.
"Institutional Investor" shall have the meaning specified in the Indenture.
"Issuer" shall mean TRI Funding II, Inc., a Delaware corporation and
its permitted successors and assigns.
"Liquidated Receivable" shall mean a Receivable that has been
liquidated pursuant to Section 3.01(b) hereof.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer for each Series pursuant to Section 4.01 hereof, a form of which is
attached to the related Series Supplement.
"Officer's Certificate" shall mean, for any Person, a certificate
signed by the President, any Vice President, Treasurer or Secretary of such
Person and, in the case of the Prior Issuer, any authorized representative of
the Prior Issuer.
"Opinion of Counsel" shall mean a written opinion of counsel in a form
that is, and from counsel who is, reasonably acceptable to the person requesting
such opinion.
"Prior Issuer" shall mean TRI Funding Company I, L.L.C., a Delaware
limited liability company and its permitted successors and assigns.
"Projected Income" shall mean, with respect to each Due Period, the
amount set forth under the line item "Amount Billed" on the Monthly Servicer's
Report.
"Purchased Assets" shall have the meaning specified in the Sale Agreement.
"Receivables Purchase Agreement" shall mean the Receivables Purchase
Agreement, dated as of the date hereof, among Trendwest, TW Holdings, Inc., the
Prior Issuer and TFI as the same may be amended or modified from time to time,
together with any annexes, appendices, exhibits or schedules thereto and
including the Assignment executed and delivered in connection therewith.
"Remittance Date" shall mean the Business Day immediately preceding
each Payment Date.
"Reported Company" shall mean each of the Issuer, the Subservicer,
WorldMark, Trendwest and its subsidiaries, provided, however, if Trendwest is no
longer acting as Servicer or Sage is no longer acting as Subservicer, then
"Reported Company" shall also mean any successor Servicer or successor
Subservicer, as the case may be, appointed pursuant to this Agreement.
"Reported Company's Financial Statements" shall include each Reported
Company's audited consolidated balance sheet, income statement, statement of
cash flows, auditors opinion letter regarding audited financial statements, all
notes to the audited financial statements and, with respect to Trendwest, a
letter stating that either (i) the auditors have found no material weakness or
(ii) specifying any material weaknesses found by such auditors; Trendwest's and
WorldMark's financial statements shall be audited, but, with respect to any
other Reported Company, if such information is not currently being audited, then
such information may be unaudited.
"Sage" shall mean Sage Systems, Inc., a Washington corporation and its
successors in interest.
"Sale Agreement" shall mean the Purchase and Sale Agreement, together
with any annexes, appendices, exhibits or schedules attached thereto, by and
among TFI, Trendwest and the Issuer dated as of the date hereof, and including
the Assignment and any Subsequent Assignments executed and delivered in
connection therewith.
"Servicer" with respect to each Series shall initially mean Trendwest
Resorts, Inc. until a successor Person shall have become the Servicer pursuant
to the applicable provisions of this Agreement, and thereafter "Servicer" shall
mean such successor Person.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice" means the notice described in Section 6.01
hereof.
"Servicing Officer" shall mean those officers of the Servicer involved
in, or responsible for, the administration and servicing of the Purchased
Assets, as identified on the list of Servicing Officers furnished by the
Servicer to the Trustee and the Noteholders from time to time.
"Subservicer" with respect to each Series shall initially mean Sage
until a successor Person shall have become the Subservicer pursuant to the
applicable provisions of this Agreement, and thereafter "Subservicer" shall mean
such successor Person.
"Subservicer Default" shall mean each of the occurrences or
circumstances which with notice or the lapse of time or both would be a
Subservicer Event of Default under this Agreement.
"Subservicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 7.02 hereof.
"Substitution Criterion" shall have the meaning specified in the Sale
Agreement.
"Substitute Receivable" shall have the meaning specified in the Sale
Agreement.
"TFI" shall mean Trendwest Funding II, Inc., a Delaware corporation,
and its permitted successors and assigns.
"Trustee" with respect to each Series shall initially mean LaSalle
National Bank, until a successor Person shall have become the Trustee pursuant
to the applicable provisions of the Indenture, and thereafter "Trustee" shall
mean such successor Person.
"Upgrade" shall have the meaning specified in the Indenture.
"Upgrade Contract" shall have the meaning specified in the Indenture.
ARTICLE 2 SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties to the Trustee and for the benefit of
the Noteholders as of the Closing Date and each Series Closing Date, which shall
survive the Closing Date and each subsequent Series Closing Date:
(a) Organization and Good Standing. The Servicer has been duly incorporated
and is validly existing in good standing as a corporation under the laws of the
State of Oregon, with requisite corporate power and authority to own its
properties, perform its obligations under this Agreement and the Indenture and
to transact the business in which it is now engaged or in which it proposes to
engage; the Servicer is duly qualified to do business and is in good standing in
each State in which the nature of its business requires it to be so qualified,
except where failure to so qualify would not have a material adverse effect on
the ability of the Servicer to perform its obligations under this Agreement and
the Indenture.
(b) Authorization and Binding Obligation. Each of this Agreement and the
Indenture has been duly authorized, executed and delivered by the Servicer and
constitutes the valid and legally binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms, subject as to enforcement to
any bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(c) No Violation. The entering into of this Agreement and the Indenture and
the performance by the Servicer of its obligations under this Agreement and the
Indenture and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or assets
of the Servicer pursuant to the terms of any material indenture, mortgage, deed
of trust or other agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject, nor will such
action result in any violation of the provisions of its Articles of
Incorporation or By-laws, or any statute or any order, rule or regulation of any
court or any regulatory authority or other governmental agency or body having
jurisdiction over it or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any court, or any
such regulatory authority or other governmental agency or body is required for
the Servicer to enter into this Agreement and the Indenture.
(d) No Proceedings. There are no proceedings or investigations pending, or
to the knowledge of the Servicer, threatened against or affecting the Servicer
or any subsidiary in or before any court, governmental authority or agency or
arbitration board or tribunal, including but not limited to any such proceeding
or investigation with respect to any environmental or other liability resulting
from the ownership or use of any of the Credits, which, individually or in the
aggregate, involve the possibility of materially and adversely affecting the
properties, business, prospects, profits or condition (financial or otherwise)
of the Servicer and its subsidiaries, or the ability of the Servicer to perform
its obligations under this Agreement or the Indenture. The Servicer is not in
default with respect to any order of any court, governmental authority or agency
or arbitration board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, and (iii) is not in violation in any material respect of any term
of any agreement, charter instrument, bylaw or instrument to which it is a party
or by which it may be bound, which violation or failure to obtain materially
adversely affect the business or condition (financial or otherwise) of the
Servicer and its subsidiaries.
(f) Investment Company. The Servicer is not an investment company which is
required to register under the Investment Company Act of 1940, as amended.
(g) Fidelity Bond. The Servicer has insurance coverage for employee
dishonesty with respect to funds it holds in an amount equal to $500,000 per
occurrence.
(h) Pension Funds. The Servicer does not maintain any pension plans.
Section 2.02. Covenants. (a) The Servicer covenants as to the Purchased
Assets:
(i) The Servicer shall not release or assign any Lien in favor of the
Trustee on any Receivables or the Credits related to any Contract in whole or in
part, except as permitted herein or in the Indenture.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in connection with
the Purchased Assets. The Servicer will not amend, rescind, cancel or modify any
Contract or term or provision thereof, except as permitted herein or in the
Indenture or in connection with an Upgrade, and the Servicer will not do
anything that would impair the rights of the Noteholders in the Purchased
Assets, except as contemplated herein or in the Indenture; provided that,
without limiting the foregoing, the Servicer may once per Contract over the
lifetime of such Contract allow the Obligor of such Contract to skip one
Scheduled Payment and add one month to the term of the related Contract;
provided, further, that such extension will not extend the date of the last
payment of any Contract one month beyond the Stated Maturity of the related
Series of Notes.
(iii) As more specifically set forth below, in performing its servicing
duties hereunder, the Servicer shall collect all payments required to be made by
the Obligors under the Contracts and enforce all material rights of the Issuer
under the Contracts. The Servicer shall not assign, sell, pledge or exchange or
in any way encumber or otherwise dispose of the Receivables or the Credits,
except as permitted hereunder or in the Indenture.
(b) The Servicer will deliver each of the accountings, statements and
reports described in Article 4 hereof to each party as set forth therein.
(c) The Servicer shall maintain insurance coverage for employee
dishonesty with respect to funds it holds in an amount greater than or equal to
$500,000 per occurrence.
(d) Trendwest and the Servicer will not consent (except as may be
required by the reasonableness standard in Section 2.3 of the Third Amended
Vacation Program Agreement, dated as of June 3, 1994, between Trendwest and
WorldMark, as amended) to any request from WorldMark to allow WorldMark to
encumber, pledge or hypothecate any vacation property under such Section 2.3.
ARTICLE 3 ADMINISTRATION AND SERVICING OF CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for
the benefit of the Noteholders, shall be responsible for, and shall, in
accordance with its customary practices, pursue the managing, servicing,
administering, enforcing and making of collections on the Contracts, the
Credits, the enforcement of the Trustee's security interest in the Receivables
and the Credits granted pursuant to the Indenture, and, if applicable, the
resale of the Credits, each in accordance with applicable law and the standards
and procedures set forth in this Agreement and any related provisions of the
Indenture, the Sale Agreement and the Receivables Purchase Agreement. The
Servicer's responsibilities shall include collecting and posting of all
payments, responding to inquiries of Obligors, investigating delinquencies,
accounting for collections and furnishing monthly and annual statements to the
Trustee and the Noteholders with respect to payments and using its best efforts
to maintain the perfected security interest of the Trustee in each Series Trust
Estate (except with respect to the Credits). Subject to the terms and conditions
of this Agreement, the Servicer (at its expense), acting alone or through a
subservicer, including the Subservicer, shall have full power and authority,
acting at its sole discretion, to do any and all things in connection with such
managing, servicing, administration, enforcement, collection and such resale of
the Credits that it may deem necessary or desirable and in the best interests of
the Noteholders, including the prudent delegation of such responsibilities.
Without limiting the generality of the foregoing, the Servicer, in its own name
or in the name of the Subservicer, shall, and is hereby authorized and empowered
by the Trustee, subject to Section 3.02 hereof, to execute and deliver (on
behalf of itself, the Noteholders, the Trustee or any of them) any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Contracts,
the Custodian Files and the Contract Files. Subject to the terms and conditions
of this Agreement, the Servicer, acting alone or through the Subservicer, also
may, in its sole discretion, waive any late payment charge or penalty, or any
other fees that may be collected in the ordinary course of servicing any
Contract. Notwithstanding the foregoing, neither the Servicer, nor the
Subservicer, shall, except pursuant to an Upgrade or a judicial order from a
court of competent jurisdiction, or as otherwise expressly provided in this
Agreement, release or waive the right to collect the Scheduled Payments or any
unpaid balance on any Contract. The Trustee shall, at the expense of the
Servicer, furnish the Servicer, or at the request of the Servicer, the
Subservicer, with any powers of attorney and other documents necessary or
appropriate to enable the Servicer or the Subservicer to carry out their
servicing and administrative duties hereunder, and the Trustee shall not be
responsible for the Servicer's or the Subservicer's application thereof.
Notwithstanding the appointment by the Servicer of the Subservicer or any
delegation of its responsibilities hereunder, the Servicer shall remain
primarily liable for the full performance of its obligations hereunder;
provided, however, that if the Servicer requests from the Holders the removal of
the Subservicer with respect to any Series after the occurrence of a Subservicer
Event of Default, or any act or omission that with the passage of time would be
a Subservicer Event of Default, and the Holders of 66-2/3% in principal amount
of the Notes of the Controlling Class of such Series Outstanding do not consent
to such request, the Servicer shall no longer be liable for any subsequent acts
of the Subservicer except any acts taken by Sage at the direction of the
Servicer.
(b) The Servicer shall conduct any Contract management, servicing,
administration, collection or enforcement actions in the following manner:
(i) The Servicer, as agent for and on behalf of the Issuer, with respect to
any Defaulted Contract shall follow such practices and procedures as are normal
and consistent with the Servicer's standards and procedures relating to its own
contracts, receivables and vacation credits that are similar to the Contracts,
Receivables and the Credits, including without limitation, the taking of
appropriate actions to foreclose or otherwise liquidate any such Defaulted
Contract, together with the related Credits, to collect any Guaranty Amounts,
and to enforce the Issuer's rights in or under the Sale Agreement and the
Receivables Purchase Agreement. The Servicer shall continue its customary
practice of applying payments on Defaulted Contracts and Delinquent Contracts
first to delinquent interest, then to interest and then to principal. All
Recoveries or Residual Proceeds in respect of any such Receivable and the
related Credits received by the Servicer or the Subservicer shall be deposited
in the Clearing Account pursuant to Section 3.03(a);
(ii) The Servicer may sue to enforce or collect upon Contracts as agent for
the Trustee. If the Servicer elects to commence a legal proceeding to enforce a
Contract, the act of commencement shall be deemed to be an automatic assignment
of the Contract to the Servicer for purposes of collection only. If, however, in
any enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, then the Trustee shall, at the
Servicer's request and expense, take such steps as the Servicer deems necessary
and instructs the Trustee in writing to take to enforce the Contract, including
bringing suit in its name or the name of the Issuer or the names of the
Noteholders, and the Trustee shall be indemnified by the Servicer for any such
action taken;
(iii) The Servicer shall exercise any rights of recourse against third
parties that exist with respect to any Contract in accordance with the
Servicer's usual practice and applicable law. In exercising recourse rights, the
Servicer is authorized on the Trustee's behalf to reassign the Contract to the
person against whom recourse exists to the extent necessary, and at the price
set forth in the document creating the recourse. The Servicer will not reduce or
diminish such recourse rights, except to the extent that it exercises such
right;
(iv) The Servicer may not accept Substitute Contracts that do not comply
with Section 3.10 hereof, Sections 3.03 and 3.04 of the Receivables Purchase
Agreement, Sections 3.03 and 3.04 of the Sale Agreement and Section 4.03 of the
Indenture;
(v) The Servicer may waive, modify or vary any terms of any Contract or
consent to the postponement of strict compliance with any such term if in the
Servicer's reasonable and prudent determination such waiver, modification or
postponement is not materially adverse to the Noteholders of any Series;
provided, however, that except as otherwise expressly permitted with respect to
an Upgrade, (A) the Servicer shall not forgive any payment, and (B) the Servicer
shall not permit any modification, waivers, variation or postponements with
respect to any Contract that would decrease the Scheduled Payment, defer the
payment of any principal or interest or any Scheduled Payment, reduce the
Aggregate Collateral Value relating to the Notes of any Series (except in
connection with actual payments attributable to such Aggregate Collateral
Value), or prevent the complete amortization of the Aggregate Collateral Value
relating to the Notes of any Series from occurring by the Calculation Date
preceding the Stated Maturity with respect to such Notes. The Monthly Servicer's
Report shall indicate any modification of any Scheduled Payment pursuant to
Section 2.02(a)(ii) hereof; and
(vi) Notwithstanding any provision to the contrary contained in this
Agreement, the Servicer or the Subservicer shall exercise any right under a
Contract to accelerate the unpaid Scheduled Payments, due or to become due
thereunder in such a manner as to maximize the net proceeds available to the
Issuer; provided, however, that the Servicer will not accelerate any Scheduled
Payment unless permitted to do so by the terms of the Contract and under
applicable law.
Section 3.02. Standard of Care. In managing, administering,
servicing, enforcing and making collections on the Contracts and the Credits
pursuant to this Agreement, each of the Servicer and the Subservicer will
provide such services in a manner consistent with past practice and applicable
law and will not change such practice in any way that would cause an adverse
material change in such practice. In any event, each of the Servicer and the
Subservicer warrants that in providing such services it will exercise that
degree of skill and care consistent with that which other servicers in the
industry customarily exercise with respect to similar contracts and vacation
credits owned or serviced by them. Each of the Servicer and the Subservicer
shall punctually perform all of its obligations and agreements under this
Agreement and shall comply with all applicable federal and state laws and
regulations, shall maintain all state and federal licenses and franchises
necessary for it to perform its servicing responsibilities hereunder, and shall
not materially impair the rights of the Noteholders in any Contracts or payments
thereunder.
Section 3.03. Clearing Account, ACH Payments and Servicer
Remittances. (a) The Servicer has previously instructed (or, with respect to
Substitute Contracts, will have instructed) each Obligor to remit his or her
payments to the Subservicer. The Subservicer shall deposit all payments for
principal and interest on the Receivables that it receives into an account (the
"Clearing Account") maintained at the Clearing Account Bank in the name of, and
in the sole control of, the Subservicer. The Servicer or the Subservicer shall
cause payments made by automated clearing house debit to be deposited directly
into the Clearing Account from the Obligor's relevant account. On each Business
Day, the Subservicer shall, or shall cause the Clearing Account Bank to,
transfer all amounts in the Clearing Account collected relating to the Contracts
and the Receivables to the Collection Account for the appropriate Series, which
shall be an Eligible Account at the Collection Account Bank in the name of the
Trustee on behalf of the Noteholders of such Series. The Trustee, based solely
on information set forth in the Monthly Servicer's Report for a Series, shall
cause the amounts in the Collection Account for such Series to be deposited in
the Distribution Account for such Series on the Remittance Date in an amount
necessary to make the distributions set forth in Section 12.02(d) of the
Indenture and Section 5.01 of the applicable Series Supplement on the related
Payment Date.
(b) Except as otherwise provided in this Agreement, the Servicer, as
agent of the Issuer, shall remit or cause to be remitted to the Subservicer for
deposit in the Clearing Account by 4:00 p.m., Seattle time, on each Business Day
the amounts described below that have been received by the Servicer through 4:00
p.m., Seattle time, on the preceding Business Day of such Series:
(i) all payments made under the Contracts relating to the
Receivables due after the applicable Series Cut-Off Date, including
prepayments but excluding taxes, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Contract purchased by the Servicer or the
Issuer, to the extent received by the Servicer; and
(iv) all Guaranty Amounts.
The Servicer shall hold in trust for the benefit of the Noteholders any
payment it receives relating to items (i) through (iv) above until such time as
the Servicer transfers such payment to the Subservicer. The Subservicer shall
hold in trust for the benefit of the Holders of the Notes any payment it
receives relating to items (i) through (iv) above until such time as the
Subservicer transfers any such payment to the Clearing Account Bank for deposit
in the Clearing Account. Any such amounts held in the Clearing Account shall be
held in trust for the benefit of the Noteholders.
Section 3.04. Property Management. Trendwest will continue to manage
the Club in accordance with the management agreement between Trendwest and
WorldMark in existence as of the date hereof, as the same may be amended from
time to time on account of (i) a change in such agreement approved by a majority
of the members of WorldMark, (ii) a change in the agreement made in order to
keep Trendwest or WorldMark in compliance with federal, state or local laws,
rules and regulations, (iii) as such agreement may be amended from time to time
with the written consent of the Holders of Notes representing 66-2/3% in
principal amount of the Notes of the Controlling Class of each Series
Outstanding or (iv) a change in such agreement in the manner described in
Exhibit B to this Agreement.
Section 3.05. Financing Statements. (a) The Servicer will make all
UCC filings and recordings as may be required pursuant to the terms of the
Indenture. The Servicer shall, in accordance with its customary servicing
procedures and at its own expense, be responsible for such steps as are
necessary to maintain perfection of such security interests. The Trustee hereby
authorizes the Servicer to re-perfect or to cause the re-perfection of such
security interest on its behalf as Trustee, as necessary.
(b) Within thirty (30) days from the date upon which the financing
statements are filed in connection with the issuance of each Series, the
Servicer shall cause searches to be conducted in such offices and promptly
deliver the results of such searches to the counsel of the initial Noteholders
of such Series.
Section 3.06. [Reserved.]
Section 3.07. [Reserved.]
Section 3.08. No Offset. Prior to the termination of this Agreement,
the obligations of the Servicer or the Subservicer under this Agreement shall
not be subject to any defense, counterclaim or right of offset which the
Servicer or the Subservicer have or may have against the Issuer, the Trustee or
any Noteholder whether in respect of this Agreement, the Indenture, each Series
Supplement, the Notes, the Sale Agreement, any Contract, Receivable, Credit or
otherwise.
Section 3.09. Servicing Compensation. As compensation for the
performance of its obligations under this Agreement for each Series, the
Servicer shall be entitled to receive the Servicer Fee related to such Series.
The Servicer Fee for each Series shall be paid monthly, commencing on the
Initial Payment Date related to such Series and terminating on the first to
occur of (i) the receipt of the last Scheduled Payment related to such Series
and related Residual Proceeds with respect to the last remaining Contract
supporting such Series, (ii) the receipt of Recoveries with respect to the last
remaining Contract supporting such Series, or (iii) the date on which the
Issuer, Trendwest or TFI purchases the last remaining Contract or Receivable, as
the case may be, supporting such Series. The Servicer Fee for each Series shall
be paid by the Issuer to the Servicer at the times and in the priority as set
forth in the Indenture and the related Series Supplement. The Servicer shall pay
all expenses incurred by it in connection with its servicing activities
hereunder, including, without limitation, payment of the fees and disbursements
of the Independent Accountants, payment of expenses incurred in connection with
distributions and reports to the Trustee and the Noteholders and shall not be
entitled to reimbursement for such expenses; provided, however, that the
Servicer will be entitled to prompt reimbursement from the Issuer for reasonable
costs and expenses incurred by the Servicer (including reasonable attorney's
fees and out-of-pocket expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted Contracts of a
Series, from amounts received as Recoveries from any Defaulted Contracts
supporting such Series. The Servicer of a Series shall pay the fees and expenses
of the Subservicer for such Series and shall not be entitled to reimbursement
therefor.
Section 3.10. Substitution or Purchase of Contracts and Receivables.
(a) Except with respect to an Upgrade, the Servicer shall not allow termination
of a Contract prior to the scheduled expiration date unless the Obligor prepays
the entire Contract in full or unless the Issuer has (i) pledged to the Trustee
a Substitute Receivable and the Issuer's interest in the related Credits under
the related Substitute Contract, and delivered to the Trustee the original
executed counterpart of such Substitute Contract or (ii) purchased such
Receivable and the Issuer's interest in the related Credits from the Trustee by
remittance of the Purchase Price to the Subservicer for deposit in the Clearing
Account in accordance with Section 3.03(a) hereof; provided, further, that
purchases and substitutions of Receivables pursuant to this subparagraph (a)
shall comply with the requirements of Section 4.03 of the Indenture and the
criteria set forth in Section 3.04 of the Sale Agreement and Section 3.04 of the
Receivables Purchase Agreement.
(b) The Servicer shall permit the Issuer to (i) purchase the
Receivable related to any Defaulted Contract or Delinquent Contract by
remittance by the Issuer to the Subservicer for deposit in the Clearing Account
in accordance with Section 3.03(a) hereof or (ii) substitute for the Receivable
related to any Defaulted Contract or Delinquent Contract a Substitute Receivable
and the Issuer's interest in the Credits under the related Substitute Contract,
upon the delivery to the Trustee of the original executed counterpart of the
Substitute Contract; provided that, purchases and substitutions of Receivables
pursuant to this subparagraph (b) shall comply with the requirements of Section
4.03 of the Indenture and the criteria set forth in Section 3.04 of the Sale
Agreement and Section 3.04 of the Receivables Purchase Agreement.
(c) Notwithstanding any other provision contained in this Agreement,
the Servicer shall not, with respect to a Defaulted Contract, negotiate or enter
into a new contract with the Obligor relating to the Credits or the Obligor's
obligations under such Defaulted Contract unless the Issuer has repurchased or
made a substitution for the Receivable related to such Defaulted Contract in the
manner set forth in subsection (b) hereof.
(d) In the event that Trendwest is required, as a result of the
breach by it of certain representations or warranties, to repurchase or
substitute a Contract pursuant to Section 3.03 of the Sale Agreement and Section
3.03 the Receivables Purchase Agreement, the Servicer shall permit such
repurchase or substitution in accordance with the terms of Sections 3.03 and
3.04 thereof.
(e) On any Determination Date after, with respect to any Series,
Trendwest and TFI collectively have repurchased Defaulted Contracts with an
aggregate Collateral Value equal to the Purchase and Substitution Limit for such
Series (or within $5,000 of such Purchase and Substitution Limit), if after
giving effect to all distributions to be made on the related Payment Date, the
Reserve Account balance for any Series will be equal to or greater than the
Reserve Account Required Balance for such Series and on such date there are
sufficient amounts to pay interest and the Principal Distribution Amount with
respect to all Notes of such Series, Trendwest may, at its option, purchase, in
its own right and not as Servicer hereunder, the Credits relating to a Defaulted
Contract supporting such Series at a price equal to 25% of (i) the initial
principal balance of the related Contract with respect to Contracts which have
not been "upgraded," or (ii) the sum of the initial principal balance of the
original Contract and the increase in principal balance due to Upgrades with
respect to Contracts that have been "upgraded." On such Determination Date, the
proceeds of such sale shall be remitted by Trendwest to the Subservicer for
immediate deposit into the Clearing Account and shall be deemed to be a
collection of principal with respect to such Contract.
(f) Prior to the substitution of any Contract hereunder, the
Subservicer shall review its records and determine that there are no liens or
other interests in such Substitute Contract, the related Substitute Receivable
and related Credits other than that of Trendwest or TFI, as applicable. If there
are any such other interests in such Substitute Contract, such Contract shall
not become a substitute Contract until all such interests have been terminated.
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01. Monthly Servicer's Reports. No later than 1:00 p.m.,
Chicago time, on each Determination Date, the Servicer shall deliver to the
Issuer, the Placement Agent, the Trustee and each Noteholder the Monthly
Servicer's Report in the form attached as Exhibit B to the applicable Series
Supplement with respect to the activity in the immediately preceding Due Period.
In the course of preparing the Monthly Servicer's Report, the Servicer shall
seek direction from the Issuer as to remittance of the funds to be paid to the
Issuer after all other distributions in accordance with the Indenture and the
applicable Series Supplement. Contracts and Receivables which have been
substituted for or purchased by Trendwest or the Issuer shall be identified by
the related Obligor number. On each Determination Date, the Subservicer shall
deliver to the Trustee, in the form of a computer disk or tape or via electronic
transmission in a format acceptable to the Trustee, containing all the
information in the Subservicer's electronic files regarding each of the
Receivables as well as any additional information reasonably requested by the
Trustee prior to the related Payment Date. The Monthly Servicer's Report for
each Series prepared for each Due Period for June, September, December and March
shall also include a summary of the following information as of the end of such
Due Period: the total number of Credits, whether sold or unsold; and the number
of developed properties of the Club; the name of each such developed property
and the total number of Credits allocated to each developed property.
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default. (a) The Servicer (or the successor Servicer if the initial
Servicer is no longer the Servicer) will deliver, or cause to be delivered, to
the Trustee, the Placement Agent and each Holder (and, upon the request of any
Noteholder, to any prospective transferee of any Note):
(i) within 120 days after the end of each fiscal year of each Reported
Company, a copy of such Reported Company's Financial Statements, all in
reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants (which shall be (i) KPMG Peat Marwick, (ii) a legal
successor thereto, or (iii) a nationally recognized accounting firm) stating
that such financial statements present fairly the financial condition of such
Reported Company (or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur), and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(ii) within 60 days of the end of each fiscal quarter, unaudited versions
of each Reported Company's consolidated balance sheet, income statement and cash
flow statement; and
(iii) with the Issuer's, the Servicer's and Trendwest's (if Trendwest is
not the Servicer) Financial Statements delivered pursuant to subsections (a)(i)
and (a)(ii) above, each of the Issuer, the Servicer and Trendwest (if Trendwest
is not the Servicer) will deliver an Officer's Certificate stating that such
officer has reviewed the relevant terms of the Indenture, the Sale Agreement,
the Receivables Purchase Agreement and this Agreement and has made, or caused to
be made, under such officer's supervision, a review of the transactions and
conditions of such Reported Company during the period covered by such Reported
Company's Financial Statements then being furnished, that the review has not
disclosed the existence of any Default or Event of Default under the Indenture
or any Servicer Default or Servicer Event of Default or, if a Default or Event
of Default under the Indenture or a Servicer Default or a Servicer Event of
Default exists, describing its nature, and the Issuer, with respect to a Default
or Event of Default, or the Servicer, with respect to a Servicer Default or a
Servicer Event of Default, describing what action such Person has taken and is
taking with respect thereto, and that on the basis of such review the officer
signing such certificate is of the opinion that during such period the Servicer
has serviced the Contracts in compliance with the procedures hereof except as
disclosed in such certificate;
(iv) with each Reported Company's Financial Statements delivered pursuant
to subsections (a)(i) and (a)(ii) above, each Reported Company shall deliver an
Officer's Certificate stating that such financial statements present fairly the
financial condition of such Reported Company;
(v) immediately upon becoming aware of the existence of any condition or
event which constitutes a Servicer Default, a Servicer Event of Default, a
Subservicer Default or a Subservicer Event of Default hereunder, a Default or an
Event of Default under the Indenture, Sale Agreement or Receivables Purchase
Agreement, or a Trigger Event or Cash Accumulation Event under the Indenture, a
written notice describing its nature and period of existence and what action the
Servicer is or proposes to take with respect thereto;
(vi) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it, the Subservicer, the Club
or the Issuer by any governmental authority or agency, or
(B) any pending or proposed court or administrative proceeding which
involves or may involve the possibility of materially and adversely affecting
the properties, business, prospects, profits or condition (financial or
otherwise) of the Servicer, the Subservicer, TFI, the Club or the Issuer,
a written notice specifying the nature of such investigation or proceeding
and what action the Servicer is taking or proposes to take with respect thereto
and evaluating its merits; and
(vi) with reasonable promptness any other data and information which may be
reasonably requested from time to time, including without limitation any
information required to be made available at any time to any prospective
transferee of any Notes in order to satisfy the requirements of Rule 144A under
the Securities Act of 1933, as amended.
(b) On or before each April 30, so long as any of the Notes of any
Series are outstanding, the Servicer shall furnish to the Trustee an Officer's
Certificate either stating that such action has been taken with respect to the
recording, filing, and rerecording and refiling of any financing statements and
continuation statements as necessary to maintain the interest of the Trustee
created by the Indenture and the related Series Supplement, TFI created by the
Sale Agreement and TFI created Receivables Purchase Agreement with respect to
the related Series Trust Estate and reciting the details of such action or
stating that no such action is necessary to maintain such interest. Such
Officer's Certificate shall also describe the recording, filing, rerecording and
refiling of any financing statements and continuation statements that will be
required to maintain the interest of the Trustee in the related Series Trust
Estate until the date such next Officer's Certificate is due.
Section 4.03. Independent Accountants' Reports. (a) Within thirty
(30) days of the Closing Date, the Servicer shall, at its expense, cause the
Independent Accountants to prepare a report, a form of which is attached as
Exhibit A hereto (which report shall also include as well the additional
procedure of comparing the actual aging of the random sample portfolio to the
aging number provided by the Subservicer's system), to the effect that such
Independent Accountants have reviewed a statistically significant random sample
(at the 95% confidence level) of the Custodian Files and that such reviewed
Custodian Files are in the possession of the Subservicer and properly accounted
for in the Subservicer's records.
(b) For each fiscal year (commencing with the fiscal year ending
December 31, 1998), the Servicer at its expense shall cause the Independent
Accountants (who may also render and deliver other services to the Servicer and
its Affiliates) to prepare a report that shall include the information set forth
in the report set forth in paragraph (a) of this Section 4.03 and which shall
also include a report addressed to the Servicer, the Trustee and the Noteholders
as of the close of such year, to the effect that the Independent Accountants
have compared the information contained in the Monthly Servicer's Reports
delivered for a random three-month period during the relevant period with
information contained in the accounts and records for such period, and, where
applicable, on the basis of such procedures and comparison, report matters which
come to the Independent Accountants' attention to indicate that the information
contained in the Monthly Servicer's Reports does not reconcile with the
information contained in the Servicer's accounts and records. If any letter
delivered pursuant to this Section 4.03 (commencing with the letter relating to
the fiscal year ending December 31, 1998) discloses such exceptions, the
Servicer at its expense shall cause the Independent Accountants to deliver an
agreed-upon procedures letter addressed to the Servicer, the Trustee and the
Noteholders for each subsequent three-month period. Such obligation shall
continue until the Independent Accountants deliver a letter relating to a
three-month period that does not disclose any such exceptions. Thereafter, the
Servicer shall cause a letter to be delivered relating to each fiscal year in
accordance with the first sentence of this Section 4.03. The Servicer shall
deliver to the Trustee a copy of any such reports within 90 days of the close of
the relevant period.
Section 4.04. Access to Certain Documentation and Information. (a)
Each of the Servicer and the Subservicer shall provide to the Trustee or any
Noteholder and their duly authorized representatives, attorneys or accountants
access to any and all documentation and to any existing data processing systems
(including, but not limited to, any data that can reasonably be generated
therefrom) regarding the applicable Series Trust Estate (including the Contract
Schedule) that the Servicer and the Subservicer may possess, such access being
afforded without charge but only upon reasonable request and during normal
business hours so as not to interfere unreasonably with the Servicer's or
Subservicer's normal operations or customer or employee relations, at offices of
the Servicer and the Subservicer designated by the Servicer and the Subservicer.
If a Servicer Event of Default, a Subservicer Event of Default, a Cash
Accumulation Event or a Trigger Event has occurred, the reasonable costs of
providing the foregoing shall be borne by the Servicer; otherwise, the Person
seeking the foregoing shall pay its, his or her own expenses relating to the
foregoing.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by Noteholders and
the Trustee a list of all Contracts the interests in which are then held as a
part of each Series Trust Estate, together with a reconciliation of such list to
that set forth in the Contract Schedule and each of the Monthly Servicer's
Reports, indicating the cumulative addition and removal of the Issuer's interest
in the Contracts from each Series Trust Estate.
(c) Each of the Servicer and the Subservicer will maintain accounts
and records as to each respective Contract serviced by the Servicer and the
Subservicer that are accurate and sufficiently detailed as to permit (i) the
reader thereof to know as of the most recent Calculation Date the status of such
Contract, including any payments, Residual Proceeds and Recoveries received or
owing (and the nature of each) thereon and (ii) the reconciliation between
payments, Residual Proceeds or Recoveries on (or with respect to) each Contract
and the amounts from time to time deposited in the applicable Collection Account
in respect of such Contract.
(d) Each of the Servicer and the Subservicer will maintain all of its
computerized accounts and records so that, from and after the time of the
acquisition of an interest in the Purchased Assets by the Issuer, the Servicer's
and the Subservicer's accounts and records (including any back-up computer
archives) that refer to any Contract, Receivable or Credits indicate clearly
that the Receivables are owned by the Issuer and are pledged, together with the
Issuer's security interest in the related Credits, to the Trustee for the
benefit of the Noteholders of a particular Series. Indication of the Trustee's
interest in a Receivable will be deleted from or modified on the Servicer's
accounts and records when, and only when, the Receivable or related Contract has
been paid in full, replaced with a Substitute Contract or purchased by Trendwest
or the Issuer or assigned to the Servicer pursuant to this Agreement, as the
case may be.
(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer or the Subservicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure to provide information
otherwise required by this Section 4.04 as a result of such observance by the
Servicer, shall not constitute a breach of this Section 4.04.
(f) All information (that is not public information) obtained by the
Trustee or any Noteholder regarding any Reported Company (pursuant to Section
4.02 or otherwise), the Obligors and the Contracts, whether upon exercise of its
rights under this Section 4.04 or otherwise, shall be maintained by the Trustee
and the Noteholder, as applicable, in confidence in accordance with procedures
adopted by the Trustee or such Noteholder, as applicable, in good faith to
protect such confidential information; provided that the Trustee and any
Noteholder may deliver or disclose such confidential information to (i) their
directors, officers, trustees, managers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by the Notes), (ii) their financial
advisors and other professional advisors who agree to hold confidential such
information substantially in accordance with the terms of this Section 4.04(f),
(iii) any other holder of any Note, (iv) any Institutional Investor to which any
Noteholder sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such confidential information to be bound by the provisions of this Section
4.04(f)), (v) any federal or state regulatory authority having jurisdiction over
the Trustee or any Noteholder, (vi) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agency that requires access to information about the Noteholders' investment
portfolio or (vii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule, regulation
or order applicable to the Trustee or any Noteholder, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
the Trustee or any Noteholder is a party or (z) if an Event of Default has
occurred and is continuing, to the extent the Trustee or any Noteholder may
reasonably determine such delivery and disclosure to be necessary or appropriate
in the enforcement or for the protection of the rights and remedies under the
Notes and the Transaction Documents.
Section 4.05. Trustee to Cooperate. Upon payment (including through
application of any prepayment) in full of any Contract, the Servicer will notify
the Trustee by written certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payments in full which are required to be deposited in the Clearing Account
pursuant to Section 3.03 hereof have been so deposited) of a Servicing Officer
and shall request delivery of the Contract to the Servicer in accordance with
Section 1.3 of the Custodian Agreement. Upon receipt of such delivery request,
the Custodian shall, within 7 days of such request by the Servicer, release such
Contract to the Servicer in accordance with the Custodian Agreement. Upon
release of such Contract, the Servicer is authorized to execute an instrument in
satisfaction of such Contract and to do such other acts and execute such other
documents as it deems necessary to discharge the Obligor thereunder and, if
applicable, release any security interest in the Credits related thereto. The
Servicer shall determine when a Contract has been paid in full. Upon the written
request of a Servicing Officer and subject to the Trustee's rights to indemnity
contained herein and in the Indenture, the Trustee shall perform such other acts
as reasonably requested in writing by the Servicer and otherwise cooperate with
the Servicer in enforcement of the Noteholders' rights and remedies with respect
to Contracts.
Section 4.06. Oversight of Servicing. (a) Prior to each Payment Date, the
Trustee shall review the Monthly Servicer's Report for each Series related
thereto and shall determine the following:
(i) that such Monthly Servicer's Report is complete on its face;
(ii) that the amounts credited to and withdrawn from the Collection Account
and the Reserve Account, and to be transferred to and withdrawn from the
Distribution Account and the balance of each such account, as set forth in the
records of the Trustee, are the same as the amount set forth in such Monthly
Servicer's Report;
(iii) that the Servicer has properly calculated certain of the amounts that
are to be distributed pursuant to Section 5.01 of the related Series Supplement
on such Payment Date, as specified in such Series Supplement; and
(iv) based solely on information set forth in such Monthly Servicer's
Report, determine that the Projected Income for the related Due Period equals
the sum of payments received as principal and interest from Obligors due in such
Due Period plus the amount of principal and interest not paid on Delinquent
Contracts and Defaulted Contracts (including amounts due by virtue of canceled
or bounced checks or other reversed payments) minus any payments due in other
Due Periods that were paid in such Due Period (both late payments and
prepayments).
(b) In the event of any discrepancy between the information set forth
in subparagraph (a) as calculated by the Servicer from that determined or
calculated by the Trustee, the Trustee shall promptly notify the Servicer of
such discrepancy. If within 30 days of such notice being provided to the
Servicer, the Trustee and the Servicer are unable to resolve such discrepancy,
the Trustee shall promptly notify the Holders of the Notes of such Series of
such discrepancy.
(c) Based solely on the information included in the Series Contract
Schedule delivered on the related Series Closing Date and the electronic reports
provided on each Payment Date thereafter, the Trustee shall determine that any
Substitute Contracts delivered under Section 3.10 satisfy the Substitution
Criterion described in clause (i) of the second sentence of Section 3.04(b) of
the Sale Agreement and clause (i) of the second sentence of Section 3.04(b) of
the Receivables Purchase Agreement.
(d) Other than as specifically set forth elsewhere in this Agreement,
the Trustee shall have no obligation to supervise, verify, monitor or administer
the performance of the Servicer or the Subservicer and shall have no liability
for any action taken or omitted by the Servicer or the Subservicer.
(e) The Trustee shall consult fully with the Servicer and the
Subservicer as may be necessary from time to time to perform or carry out the
Trustee's obligations hereunder, including the obligation to choose at any time
a successor to the duties and obligations of the Servicer as servicer or
Subservicer under Section 6.02 hereof.
(f) The Subservicer shall provide the Trustee with a copy of the
Subservicer's proprietary software that the Subservicer currently uses to
service the Contracts, which software shall be held in escrow by the Trustee,
only to be used solely by the Trustee in the event that the Subservicer is
removed or otherwise ceases to act in the capacity as Subservicer, and only
until such time as the Trustee can obtain replacement software or appoint a
successor Subservicer in accordance with Section 7.03 (up to a maximum of 90
days from the date that the Subservicer ceases performing services under this
Agreement); if the Trustee needs to use such software beyond such 90-day period,
Trendwest will pay the Subservicer, on behalf of the Trustee (prior to the
expiration of such 90 day period) a license fee of $10,000.00 (payable in
advance), which payment shall extend the Trustee's license to use such software
until the earlier to occur of: (i) two (2) years from the date that the
Subservicer ceases performing services under this Agreement; or (ii) final
payment of all amounts due on the Notes of each Series Outstanding. The Trustee
may extend such license for successive two-year periods upon payment of $10,000
per period (which fees shall be paid by Trendwest), due prior to the beginning
of each such period. The limited license to use the Subservicer's software set
forth in this paragraph may not be sublicensed, assigned or transferred by the
Trustee without Subservicer's prior written consent, and such license does not
include the right to reverse assemble, reverse engineer or reverse compile the
software. The Trustee agrees to take all appropriate measures to protect the
confidentiality of such software and will return all copies of such software
upon the earlier to occur of: (i) the expiration of Trustee's license to use the
software (as detailed above); (ii) Trustee's conversion to replacement software
or alternative servicing arrangements; or (iii) final payment of all amounts due
on the Notes of each Series Outstanding.
ARTICLE 5 THE SERVICER, THE SUBSERVICER AND THE ISSUER
Section 5.01. Servicer and Subservicer Indemnification. (a) The
Servicer shall indemnify and hold harmless the Trustee, TFI, the Issuer, and
each Series Trust Estate, for the benefit of the Noteholders, from and against
any loss, liability, claim, expense, damage or injury suffered or sustained to
the extent that such loss, liability, claim, expense, damage or injury arose out
of or was imposed by reason of the failure by the Servicer to perform its duties
under this Agreement or are attributable to errors or omissions of the Servicer
related to such duties; provided, however, that the Servicer shall not indemnify
any party to the extent that acts of fraud, gross negligence or breach of
fiduciary duty by such party contributed to such loss, liability, claim,
expense, damage or injury.
(b) The Subservicer shall indemnify and hold harmless the Trustee,
TFI, the Issuer, the Servicer and each Series Trust Estate, for the benefit of
the Noteholders, from and against any loss, liability, claim, expense, damage or
injury suffered or sustained to the extent that such loss, liability, claim,
expense, damage or injury arose out of or was imposed by reason of the failure
by the Subservicer to perform its duties under this Agreement or are
attributable to errors or omissions of the Subservicer related to such duties;
provided, however, that the Subservicer shall not indemnify any party to the
extent that acts of fraud, gross negligence or breach of fiduciary duty by such
party contributed to such loss, liability, claim, expense, damage or injury.
(c) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer or Subservicer has made any indemnity
payments to the Trustee or the Noteholders pursuant to this Section and such
party thereafter collects any of such amounts from others, such party will
promptly repay such amounts collected to the Servicer or Subservicer, as
applicable, without interest. The provisions of this Section 5.01 shall survive
any expiration or termination of this Agreement.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer
and the Subservicer shall keep in full effect their existence and good standing
as corporations in the State of their incorporation and will obtain and preserve
their qualification to do business as foreign corporations in each jurisdiction
in which such qualification is or shall be necessary to enable the Servicer or
the Subservicer to perform their duties under this Agreement, except where the
failure to so qualify would not have a material adverse effect on any Series
Trust Estate or the ability of the Servicer or the Subservicer to perform their
duties hereunder; provided, however, that the Servicer and the Subservicer may
reincorporate in another State, if to do so would be in the best interests of
the Servicer or the Subservicer and would not have a material adverse effect
upon the Noteholders.
(b) Neither the Servicer nor the Subservicer shall (i) convey,
transfer or lease substantially all of its assets as an entirety to any Person,
or (ii) merge or consolidate with another Person, unless such Person or the
merged or consolidated entity acquires substantially all the assets of the
Servicer or the Subservicer, as the case may be, as an entirety and executes and
delivers to the Issuer and the Trustee an agreement, in form and substance
reasonably satisfactory to the Issuer and the Trustee, which contains an
assumption by such Person or entity of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Servicer or the Subservicer, as the case may be, under this Agreement; provided
that nothing herein shall prevent the Servicer from selling contracts and
receivables which are not Purchased Assets pursuant to a receivables financing.
Section 5.03. Limitation on Liability of the Servicer, the
Subservicer and Others. Except as provided in Section 5.01, the Servicer, the
Subservicer and any of the officers, directors, employees or agents of the
Servicer or the Subservicer shall not be under any liability for any action
taken or for refraining from the taking of any action in their capacity as
Servicer or Subservicer pursuant to this Agreement; provided, however, that this
provision shall not protect the Servicer or Subservicer or any such Person
against any liability which would otherwise be imposed by reason of willful
misconduct, bad faith or negligence (which includes negligence with respect to
the duties of the Servicer or Subservicer explicitly set forth in this
Agreement) in the performance of its duties hereunder. The Servicer, the
Subservicer and any officer, director, employee or agent of the Servicer or the
Subservicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person with respect to any matters
arising hereunder. No implied covenants or obligations shall be read into the
Servicing Agreement against the Servicer or the Subservicer. In the event the
Servicer or the Subservicer perform any activities beyond the requirements of
this Agreement, they shall have the option but will not be required to perform
such activities in the future.
Section 5.04. The Servicer and Subservicer Not to Resign. (a)
Neither the Servicer nor the Subservicer (except as set forth in the last
sentence of this subsection (a) shall resign from the duties and obligations
hereby imposed on it by this Agreement except upon a determination by the Board
of Directors of the Servicer or Subservicer, as the case may be, that by reason
of change in applicable legal requirements, with which the Servicer or
Subservicer, as the case may be, cannot reasonably comply, the continued
performance by the Servicer or the Subservicer, as the case may be, of its
duties under this Agreement would cause it to be in violation of such legal
requirements, said determination to be evidenced by a resolution from the
appropriate Board of Directors to such effect, accompanied by an Opinion of
Counsel to such effect and reasonably satisfactory to the Trustee. The
Subservicer may resign as Subservicer hereunder upon the termination of the
Service Agreement between the Servicer and the Subservicer, dated as of January
1, 1996 or any successor agreement thereto.
(b) No such resignation shall become effective until a successor
Servicer or Subservicer, as the case may be, shall have assumed the
responsibilities and obligations of the Servicer or Subservicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties
and obligations of the Servicer and Subservicer under this Agreement shall
continue until this Agreement shall have been terminated as provided in Section
8.01 hereof, and shall survive the exercise by the Issuer or the Trustee of any
right or remedy under this Agreement, or the enforcement by the Issuer, the
Trustee or any Noteholder of any provision of the Notes or this Agreement.
Section 5.05. Issuer Indemnification. The Issuer shall indemnify and
hold harmless the Servicer and the Subservicer (but solely from the amounts to
be distributed to the Issuer as set forth in Sections 5.01 and 5.02 of the
applicable Series Supplement) from and against any loss, liability, expense,
damage or injury suffered or sustained by the Servicer or the Subservicer,
including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, which arises
out of the Servicer's or the Subservicer's activities hereunder; provided,
however, that the Issuer shall not indemnify the Servicer or the Subservicer if
the Servicer's or the Subservicer's activities constituted fraud, willful
misconduct, negligence (which includes negligence with respect to the duties of
the Servicer which are explicitly set forth in this Agreement) or breach of
fiduciary duty by the Servicer or the Subservicer for any amounts for which the
Servicer or Subservicer is obligated to indemnify the Issuer or other Persons
pursuant to Section 5.01 hereof.
ARTICLE 6 SERVICING TERMINATION
Section 6.01. Servicer Events of Default. (a) With respect to each Series,
any of the following acts or occurrences shall constitute a Servicer Event of
Default with respect to such Series:
(i) any failure by the Servicer to deliver to the Subservicer for payment
to Noteholders any proceeds or payments received from an Obligor or in respect
of the related Series Trust Estate and required to be so delivered under the
terms of the Indenture and this Agreement that continues unremedied until 1:00
p.m., Chicago time, on the second successive Business Day following such
failure; provided, however, that the Subservicer, upon receiving actual
knowledge of such failure, shall give the Servicer and the Trustee prompt
written, telecopied or telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Subservicer to deliver such notice to the Servicer
shall not prevent the occurrence of a Servicer Event of Default; or
(ii) any failure by the Servicer to deliver a Monthly Servicer's Report
pursuant to Section 4.01 hereof that continues unremedied until 1:00 p.m.,
Chicago time, the following Business Day; provided, however, that if the Trustee
has actual knowledge that the Servicer has not delivered such Monthly Servicer's
Report by 1:00 p.m., Chicago time, on a Determination Date, the Trustee shall
give the Servicer written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to deliver such notice
to the Servicer shall not prevent the occurrence of a Servicer Event of Default;
or
(iii) any failure by the Servicer to remit any Purchase Price received by
it to the Subservicer that continues unremedied until 4:00 p.m., Chicago time,
the following Business Day; provided, however, that if the Servicer has not
remitted any Purchase Price received by it to the Subservicer by 2:00 p.m.,
Chicago time, on the Determination Date and the Trustee has received written
notification from the Subservicer by way of the applicable Monthly Servicer's
Report or otherwise that such Purchase Price has not been paid, the Trustee
shall give the Servicer prompt written, telecopied or telephonic notice of such
failure. Notwithstanding the foregoing, any failure by the Trustee to deliver
such notice to the Servicer shall not prevent the occurrence of a Servicer Event
of Default; or
(iv) any failure by the Servicer to make remittances (other than a
remittance of Purchase Price referred to in clause (iii) above) or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until 1:00
p.m., Chicago time, of the second successive Business Day; or
(v) any failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or the
Indenture or the related Series Supplement, as the case may be, or any
representation or warranty of the Servicer set forth in Section 2.01 of this
Agreement shall prove to be incorrect in any material respect, which failure or
breach continues unremedied for a period of 30 days after the date on which the
Servicer becomes aware of such failure or breach, or receives written notice of
such failure or breach; or
(vi) any assignment by the Servicer to a delegate of its duties or rights
under this Agreement, except as specifically permitted hereunder, or any attempt
to make such an assignment; or
(vii) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Servicer or a petition against the Servicer in an
involuntary case under any federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official for the Servicer or for any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Servicer and the continuance of any such decree or order
unstayed and in effect, or failure for such petition to be dismissed, for a
period of 60 consecutive days; or
(viii) the commencement by the Servicer of a voluntary case under any
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency, reorganization or similar law,
or the consent by the Servicer to the appointment of or taking possession by a
conservator, receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official in any insolvency, readjustment of debt, marshaling of
assets and liabilities, bankruptcy or similar proceedings of or relating to the
Servicer relating to a substantial part of its property, or the making by the
Servicer of an assignment for the benefit of creditors, or the failure by the
Servicer generally to pay its debts as such debts become due or if the Servicer
shall admit in writing its inability to pay their debts as they become due, or
the taking of corporate action by the Servicer in furtherance of any of the
foregoing; or
(ix) the stockholders' equity of the Servicer and its consolidated
subsidiaries, determined in accordance with generally accepted accounting
principles, as would be shown on a consolidated balance sheet for such Persons,
is below $50,000,000; or
(x) the occurrence of a Trigger Event if the initial Servicer is the
Servicer; or
(xi) the occurrence of a Subservicer Event of Default.
(b) If a Servicer Event of Default shall have occurred and be
continuing with respect to any Series, the Trustee shall, upon written direction
of the Holders of Notes representing not less than 66-2/3% in principal amount
of the Controlling Class of Notes Outstanding of such Series, by notice (the
"Servicer Termination Notice") given in writing to the Servicer of such Series
terminate all, but not less than all, of the rights and obligations (except as
expressly provided herein) of the Servicer under this Agreement with respect to
such Series. Notwithstanding the foregoing, a delay in or failure of performance
under Sections 6.01(a)(ii) or 6.01(a)(v) hereof for a period of 30 or more days
shall not constitute a Servicer Event of Default if such delay or failure could
not have been prevented by the exercise of reasonable diligence by the Servicer
and such delay or failure was caused by acts of declared or undeclared war,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes; provided, however, that in
any event, such delay or failure shall constitute a Servicer Event of Default if
it continues unremedied for a period of 35 days. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement, and the
Servicer shall provide the Trustee, the Issuer and the Noteholders with prompt
notice of such failure or delay by it or the Subservicer, together with a
description of its efforts to so perform its obligations.
(c) [Reserved]
(d) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer with respect to such Series
under this Agreement, whether with respect to the Notes or the Contracts of such
Series or otherwise, shall pass to and be vested in the successor Servicer
appointed pursuant to Section 6.02 hereof, and, without limitation, such
successor Servicer is hereby authorized and empowered to execute and deliver, on
behalf of such Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer of the Contracts and related documents related
to such Series, or otherwise. The Servicer agrees to cooperate with the Trustee
and the successor Servicer in effecting the termination of the responsibilities
and rights of the Servicer hereunder, including, without limitation, the
transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held by the Servicer for deposit related to such
Series, or have been deposited by the Servicer or thereafter received with
respect to Contracts related to such Series. To assist the successor Servicer in
enforcing all rights under such Contracts, the outgoing Servicer, at its own
expense, shall transfer its records (electronic and otherwise) relating to such
Contracts to the successor Servicer in such form as the successor Servicer may
reasonably request and shall transfer the related Contracts (to the extent not
held by the Trustee) and all other records, correspondence and documents
relating to such Contracts that it may possess to the successor Servicer in the
manner and at such times as the successor Servicer shall reasonably request.
Section 6.02. Appointment of Successor Servicer. (a)(i) On and after
the time at which the Servicer with respect to a Series resigns as Servicer
pursuant to Section 5.04 hereof or is terminated as Servicer pursuant to Section
6.01 hereof, the Trustee shall, at the direction of Holders of Notes
representing not less than 66-2/3% in principal amount of the Controlling Class
of Notes Outstanding of such Series appoint a successor Servicer with respect to
such Series.
(ii) The successor Servicer with respect to a Series shall be the
successor in all respects to the Servicer of such Series in its capacity as
Servicer for such Series under this Agreement, and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer with respect to such Series
by the terms and provisions hereof; provided, however, that any such successor
shall not be liable for any acts or omissions of such outgoing Servicer or for
any breach by such outgoing Servicer of any of its representations and
warranties contained herein or in any related document or agreement. Subject to
the consent of the Holders representing not less than 66-2/3% in principal
amount of the Controlling Class of Notes Outstanding of such Series, such
successor Servicer may subcontract with another firm to act as subservicer so
long as such successor Servicer remains fully responsible and accountable for
performance of all obligations of the Servicer with respect to such Series on
and after the time such Servicer receives the Servicer Termination Notice with
respect to such Series. Such successor Servicer shall be entitled to the
Servicer Fee for such Series in connection with acting as Servicer with respect
to such Series hereunder.
(b) Each of the Servicer, the Subservicer, the Issuer, the Trustee
and any successor Servicer or successor Subservicer with respect to each Series,
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. Upon any succession, such successor Servicer as
well as any successor Subservicer shall notify the Obligors that it has been
appointed Servicer with respect to such Series under this Agreement with respect
to the Contracts.
Section 6.03. Notification to Noteholders. The Servicer with respect
to a Series shall promptly notify the Subservicer, the Issuer and the Trustee of
any Servicer Event of Default with respect to such Series upon actual knowledge
thereof by an officer of such Servicer. Upon any termination of, or appointment
of a successor to, such Servicer pursuant to this Article 6, the Trustee with
respect to a Series shall give prompt written notice thereof to the Noteholders
of such Series at their respective addresses appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Trustee with respect to
such Series shall, at the direction of the Holders of Notes representing not
less than 66-2/3% in principal amount of the Controlling Class of Notes
Outstanding of such Series, on behalf of all Noteholders of such Series, waive
any default by the Servicer with respect to a Series in the performance of its
obligations hereunder and its consequences, other than a default with respect to
required deposits and payments in accordance with Article 3 or a default of the
type set forth in clause (vii) or (viii) of Section 6.01(a) hereof, which waiver
shall require the consent of each Noteholder of such Series. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly waived.
Section 6.05. Effects of Termination of Servicer. (a) Upon the
appointment of a successor Servicer for any Series, the predecessor Servicer for
such Series shall remit any Scheduled Payments related to such Series and any
other payments or proceeds that such predecessor may receive pursuant to any
Contract or otherwise related to such Series to such successor after such date
of appointment.
(b) After the delivery of a Servicer Termination Notice with respect
to such Series, the outgoing Servicer for such Series shall have no further
obligations with respect to the management, administration, servicing,
enforcement, custody or collection of the Contracts for such Series, and the
successor Servicer for such Series shall have all of such obligations, except
that such outgoing Servicer will transmit or cause to be transmitted directly to
such successor Servicer promptly on receipt and in the same form in which
received, any amounts held by such outgoing Servicer (properly endorsed where
required for such successor to collect them) received as payments upon or
otherwise in connection with the Contracts for such Series. Such outgoing
Servicer's indemnification obligations pursuant to Section 5.01 hereof will
survive the termination of such Servicer but will not extend to any acts or
omissions of a successor Servicer.
Section 6.06. No Effect on Other Parties. (a) Upon any termination
of the rights and powers of the Servicer for any Series pursuant to Section
6.01, or upon any appointment of a successor to such Servicer, all the rights,
powers, duties and obligations of Trendwest under this Agreement, the Indenture,
each Series Supplement, the Receivables Purchase Agreement and the Sale
Agreement, other than Trendwest's rights, powers, duties and obligations as
Servicer for such Series therein, shall remain unaffected by such termination or
appointment and shall remain in full force and effect thereafter.
ARTICLE 7 THE SUBSERVICER
Section 7.01. Representations and Warranties. The Subservicer makes the
following representations and warranties to the Trustee and for the benefit of
the Noteholders which shall survive the Closing Date:
(a) Organization and Good Standing. The Subservicer has been duly
incorporated and is validly existing in good standing as a corporation under the
laws of the State of Washington, with requisite corporate power and authority to
own its properties, perform its obligations under this Agreement and to transact
the business in which it is now engaged or in which it proposes to engage; the
Subservicer is duly qualified to do business and is in good standing in each
State in which the nature of its business requires it to be so qualified, except
where failure to so qualify would not have a material adverse effect on the
ability of the Subservicer to perform its obligations under this Agreement.
(b) Authorization and Binding Obligation. This Agreement has been duly
authorized, executed and delivered by the Subservicer and constitutes the valid
and legally binding obligation of the Subservicer enforceable against the
Subservicer in accordance with its terms, subject as to enforcement to any
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(c) No Violation. The entering into of this Agreement and the performance
by the Subservicer of its obligations under this Agreement and the consummation
of the transactions contemplated herein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the contemplated pursuant to the terms of any
material indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its property or
assets is subject, nor will such action result in any violation of the
provisions of its Articles of Incorporation or By-laws, or any statute or any
order, rule or regulation of any court or any regulatory authority or other
governmental agency or body having jurisdiction over it or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with any court, or any such regulatory authority or other
governmental agency or body is required for the Subservicer to enter into this
Agreement.
(d) No Proceedings. There are no proceedings or investigations pending, or
to the knowledge of the Subservicer, threatened against or affecting the
Subservicer or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including but not limited to any such
proceeding or investigation with respect to any environmental or other liability
resulting from its business which, individually or in the aggregate, involve the
possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Subservicer, or
the ability of the Subservicer to perform its obligations under this Agreement.
The Subservicer is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(e) Approvals. The Subservicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, and (iii) is not in violation in any material respect of any term
of any agreement, charter instrument, bylaw or instrument to which it is a party
or by which it may be bound, which violation or failure to obtain materially
adversely affect the business or condition (financial or otherwise) of the
Subservicer and its subsidiaries.
Section 7.02. Subservicer Events of Default. (a) With respect to each
Series, any of the following acts or occurrences shall constitute a Subservicer
Event of Default with respect to such Series:
(i) any failure by the Subservicer to deliver to the Clearing Account Bank
for deposit in the Clearing Account any proceeds or payments received from an
Obligor or the Servicer or in respect of the related Series Trust Estate and
required to be so delivered under the terms of the Indenture and this Agreement
that continues unremedied until 1:00 p.m., Chicago time, on the second
successive Business Day following such failure; provided, however, that the
Trustee, upon receiving actual knowledge of such failure, shall give the
Subservicer prompt written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to deliver such notice
to the Subservicer shall not prevent the occurrence of a Subservicer Event of
Default; or
(ii) any failure on the part of the Subservicer duly to observe or perform
any other covenants or agreements of the Subservicer set forth in this
Agreement, or any representation or warranty of the Subservicer set forth in
Section 7.01 of this Agreement shall prove to be incorrect in any material
respect, which failure or breach continues unremedied for a period of 30 days
after the date on which the Subservicer becomes aware of such failure or breach,
or receives written notice of such failure or breach; or
(iii) any assignment by the Subservicer to a delegate of its duties or
rights under this Agreement, except as specifically permitted hereunder, or any
attempt to make such an assignment; or
(iv) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Subservicer or a petition against the Subservicer
in an involuntary case under any federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official for the Subservicer or for any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Subservicer and the continuance of any such decree or order
unstayed and in effect, or failure for such petition to be dismissed, for a
period of 60 consecutive days; or
(v) the commencement by either the Subservicer of a voluntary case under
any federal bankruptcy laws, as now or hereafter in effect, or any other present
or future federal or state bankruptcy, insolvency, reorganization or similar
law, or the consent by either the Subservicer to the appointment of or taking
possession by a conservator, receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official in any insolvency, readjustment of debt,
marshaling of assets and liabilities, bankruptcy or similar proceedings of or
relating to the Subservicer relating to a substantial part of its property, or
the making by the Subservicer of an assignment for the benefit of creditors, or
the failure by the Subservicer generally to pay its debts as such debts become
due or if the Subservicer shall admit in writing its inability to pay their
debts as they become due, or the taking of corporate action by the Subservicer
in furtherance of any of the foregoing.
(b) If a Subservicer Event of Default with respect to any Series shall have
occurred and be continuing, then the Trustee shall, upon written direction of
the Holders of Notes representing 66-2/3% in principal amount of the Controlling
Class of the Notes Outstanding of such Series, by notice (the "Subservicer
Termination Notice") given in writing to the Subservicer for such Series
terminate all, but not less than all, of the rights and obligations of such
Subservicer under this Agreement. Notwithstanding the foregoing, a delay in or
failure of performance under Sections 7.02(a)(ii) hereof for a period of 30 or
more days shall not constitute a Subservicer Event of Default if such delay or
failure could not have been prevented by the exercise of reasonable diligence by
the Subservicer and such delay or failure was caused by acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or similar causes; provided,
however, that in any event, such delay or failure shall constitute a Subservicer
Event of Default if it continues unremedied for a period of 35 days. The
preceding sentence shall not relieve the Subservicer from using its best efforts
to perform its obligations in a timely manner in accordance with the terms of
this Agreement, and the Subservicer shall provide the Trustee, the Issuer and
the Noteholders with prompt notice of such failure or delay by it, together with
a description of its efforts to so perform its obligations.
Section 7.03. Appointment of Successor Subservicer. (a)(i) On and
after the time at which Subservicer for a Series resigns pursuant to Section
5.04 hereof or is terminated as Subservicer pursuant to Section 7.02(b) hereof,
the Trustee shall, at the direction of Holders of Notes representing at least
66-2/3% in principal amount of the Controlling Class of Notes Outstanding of
such Series appoint a successor Subservicer.
(ii) The successor Subservicer for a Series shall be the successor in
all respects to the Subservicer for such Series in its capacity as Subservicer
under this Agreement, and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Subservicer with respect to such Series by the terms and
provisions hereof; provided, however, that any such successors shall not be
liable for any acts or omissions of the outgoing Subservicer, as the case may
be, or for any breach by either the outgoing Subservicer of any of its
representations and warranties contained herein or in any related document or
agreement.
(b) The Servicer, the Subservicer, the Issuer, the Trustee and any
successor Servicer or successor Subservicer shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Upon any succession, such successor Servicer as well as any successor
Subservicer shall notify the Obligors that it has been appointed Servicer or
Subservicer, as the case may be, under this Agreement with respect to the
Contracts.
Section 7.04. Notification to Noteholders. The Subservicer for a
Series shall promptly notify the Servicer, the Issuer and the Trustee of any
Subservicer Event of Default with respect to such Series upon actual knowledge
thereof by the Subservicer. Upon any termination of, or appointment of a
successor to, the Subservicer for a Series pursuant to this Article 7, the
Trustee shall give prompt written notice thereof to the Noteholders at their
respective addresses appearing in the Note Register.
Section 7.05. Waiver of Past Defaults. The Trustee shall, at the
direction of the Holders of Notes representing more than 66-2/3% in principal
amount of the Controlling Class of the Notes Outstanding of any affected Series,
on behalf of all Noteholders of such Series, waive any default by the
Subservicer in the performance of its obligations hereunder and its
consequences, other than a default with respect to required deposits and
payments in accordance with Article 3 or a default of the type set forth in
clause (iv) or (v) of Section 7.02(a) hereof, which waiver shall require the
consent of each Noteholder of such Series. Upon any such waiver of a past
default, such default shall cease to exist, and any Subservicer Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly waived.
Section 7.06. Effects of Termination of Subservicer. (a) Upon the
appointment of a successor Subservicer for a Series, the predecessor Subservicer
shall remit any Scheduled Payments relating to such Series and any other
payments or proceeds that such predecessor may receive pursuant to any Contract
or otherwise relating to such Series to such successor after such date of
appointment.
(b) After the delivery of a Subservicer Termination Notice, the
outgoing Subservicer of a Series shall have no further obligations with respect
to the management, administration, servicing, enforcement, custody or collection
of the Contracts relating to such Series, and the successor Subservicer shall
have all of such obligations, except that the outgoing Subservicer will transmit
or cause to be transmitted directly to such successor Subservicer promptly on
receipt and in the same form in which received, any amounts held by the outgoing
Subservicer (properly endorsed where required for such successor to collect
them) received as payments upon or otherwise in connection with the Contracts
relating to such Series.
ARTICLE 8 MISCELLANEOUS PROVISIONS
Section 8.01. Termination of the Servicing Agreement. (a) Absent a
termination pursuant to Section 6.01 or 7.02 hereof, the respective duties and
obligations of the Servicer, the Subservicer, the Issuer and the Trustee created
by this Agreement shall terminate upon the discharge of the Indenture in
accordance with its terms; and the respective duties and obligations of the
Trustee shall terminate with respect to the Trustee in the event the Trustee
resigns or is replaced under Section 7.09 of the Indenture; provided, however,
that no resignation or removal of the Trustee and no appointment of a successor
Trustee shall become effective until the acceptance of appointment by the
successor Trustee under Section 7.10 of the Indenture. Upon the termination of
this Agreement pursuant to this Section 8.01(a), each of the Servicer and the
Subservicer shall pay all monies with respect to the Receivables and Credits
held by the Servicer or the Subservicer, as the case may be, and to which the
Servicer and the Subservicer or the Subservicer, as the case may be, is not
entitled, to the Issuer or upon the Issuer's order. Each of the Servicer's and
Subservicer's indemnification obligations pursuant to Section 5.01 hereof will
survive the termination of this Agreement.
(b) This Agreement shall not be automatically terminated as a result
of an Event of Default under the Indenture or any action taken by the Trustee
thereafter with respect thereto, and any liquidation or preservation of the
applicable Series Trust Estate by the Trustee thereafter shall be subject to the
rights of the Servicer to service the Receivables and to collect servicing
compensation as provided hereunder.
Section 8.02. Amendments. (a) This Agreement may be amended from
time to time by the Issuer, the Subservicer and the Servicer, with the consent
of the Trustee, and the Holders of not less than 66-2/3% in principal amount of
the Controlling Class of Notes Outstanding of each affected Series for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement; provided, however, that, with respect to
any Series, the number of Holders of such Series required for such consent shall
be modified as set forth in the related Series Supplement; provided, further,
that no such amendment shall, without the consent of each affected Noteholder
(i) alter the priorities with which any allocation of funds shall be made under
this Agreement; (ii) permit the creation of any lien on any Series Trust Estate
(other than the lien of the Indenture) or any portion thereof or deprive any
such Noteholder of the benefit of this Agreement with respect to the related
Series Trust Estate or any portion thereof; (iii) modify any provision herein
relating to the voting percentage of Noteholders necessary to grant consent or
give direction, or (iv) modify this Section 8.02 or Sections 6.02 or 6.04
hereof.
(b) Promptly after the execution of any amendment, the Servicer shall
send to the Subservicer, the Trustee, the Rating Agency and each Holder of the
Notes a conformed copy of each such amendment.
(c) It shall be necessary, in any consent of Noteholders under this
Section 8.02, to approve the particular form of any proposed amendment. The
manner of obtaining such consent and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Trustee may prescribe.
(d) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
Section 8.03. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York without regard to
conflict of laws principles and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
Section 8.04. Notices, etc., to Trustee, Issuer, Servicer and
Subservicer. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with any party hereto
shall be sufficient for every purpose hereunder if in writing and telecopied or
mailed, first-class postage prepaid and addressed to the appropriate address
below:
(a) to the Trustee at 135 South LaSalle Street, Suite 1625, Chicago,
Illinois 60674 (facsimile number (312) 904-2084), Attention: Asset Backed
Securities Trust Services, TRI Funding II [specify Series], or at any other
address previously furnished in writing to the Issuer, the Noteholders, the
Servicer and the Subservicer; or
(b) to the Issuer at TRI Funding II, Inc., 3250 Lakeport Boulevard, Klamath
Falls, Oregon 97601 (facsimile number (503) 885-7454), Attention: Treasurer, or
at any other address previously furnished in writing to the Trustee, the
Noteholders, the Servicer and the Subservicer by the Issuer; or
(c) to the Servicer at Trendwest Resorts, Inc., 12301 N.E. 10th Place,
Bellevue, Washington 98005 (facsimile number (425) 990-2302), Attention:
Executive Vice President, or at any other address previously furnished in
writing to the Trustee, the Noteholders, the Subservicer and the Issuer; or
(d) to the Subservicer at Sage Systems, Inc., 2135 112th Avenue N.E., Suite
101, Bellevue, Washington 98004 (facsimile number (425) 462-0264), Attention:
President, or at any other address previously furnished in writing to the
Trustee, the Noteholders and the Servicer; or
(e) to the Rating Agency at Fitch Investors Service, L.P., One State Street
Plaza, New York, New York 10004 (facsimile (212) 480-4438), Attention:
Asset-Backed Securities or at any other address previously furnished in writing
to the Trustee, the Noteholders, the Subservicer, the Servicer and the Issuer.
Section 8.05. Notices and Other Documents to Noteholders; Waiver.
(a) Where this Agreement provides for notice to Noteholders of any event, such
notice shall be in writing and sent (i) by telefacsimile if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (ii) by registered or certified mail with
return receipt requested (postage prepaid), or (iii) by a recognized overnight
delivery service (with charges prepaid). Any such notice to a Noteholder or its
nominee must be sent to (i) such Person at the address specified for such
communications in the Note Register, or at such other address as the Noteholder
shall have specified to the Trustee in writing and (ii) if specified, to such
other Person as shall be identified in writing to the Trustee by each Noteholder
or its nominee. The Trustee acknowledges receipt of Annex 1 to the Note Purchase
Agreement, which sets forth such information with respect to the initial
Holders. Notice under this Section 8.05 will be deemed to be given only when
actually received.
(b) Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(c) Any reports, documents or other communications other than notices
to be sent to Noteholders may be telecopied or mailed, first class postage
prepaid and shall be addressed to the Noteholders and their nominees and
designees, if applicable, as set forth in paragraph (a) above.
Section 8.06. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid, such
provisions shall be deemed severable from the remaining covenants and provisions
of this Agreement, and shall in no way affect the validity or enforceability of
such remaining provisions, the rights of any parties hereto, or the rights of
the Trustee or any Noteholder. To the extent permitted by law, the parties
hereto waive any provision of law which renders any provision of this Agreement
prohibited or unenforceable in any respect.
Section 8.07. Binding Effect. All provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto, and all such provisions shall inure to the
benefit of the Noteholders. This Agreement may not be modified except by a
writing signed by all parties hereto.
Section 8.08. Article Headings and Captions. The article headings and
captions in this Agreement are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof.
Section 8.09. Legal Holidays. In the case where the date on which
any action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
Section 8.10. Assignment for Security for the Notes. The Servicer
understands that the Issuer will assign to and grant to the Trustee a security
interest in all of its right, title and interest to this Agreement. The Servicer
consents to such assignment and grant and further agree that all
representations, warranties, covenants and agreements of the Servicer made
herein shall also be for the benefit of and inure to the Trustee and all Holders
from time to time of the Notes.
Section 8.11. No Servicing Assignment. Notwithstanding anything to
the contrary contained herein, except as provided in Sections 5.02 and 5.04
hereof, this Agreement may not be assigned by the Issuer, the Seller, the
Subservicer or the Servicer (except with respect to the appointment of a
subservicer) without the prior written consent of the Holders of Notes
representing not less than 66-2/3% in principal amount of the Controlling Class
of the Notes Outstanding of each affected Series.
Section 8.12. Counterparts. This Agreement may be executed in one or more
counterparts all of which together shall constitute one original document.
Section 8.13. Duties of the Parties. This Servicing Agreement has
been drafted with the intent that one Person shall serve as Servicer, one Person
shall serve as Trustee, and one Person shall serve as Subservicer with respect
to all Series of Notes Outstanding. However, any Series may have a different
Person serving as Servicer, Trustee or Subservicer because of a resignation or
removal of such Person with respect to such Series. References to each of the
Servicer, the Trustee and the Subservicer shall be read so that each such Person
shall have the rights and duties of the Servicer, Trustee or Subservicer, as the
case may be, only with respect to each Series for which such Person serves in
such role.
<PAGE>
IN WITNESS WHEREOF, the Issuer, Trendwest, the Servicer, the
Subservicer and the Trustee have caused this Agreement to be duly executed by
their respective officers or authorized signatories thereunto duly authorized as
of the date and year first above written.
TRI 6 FUNDING II, INC., as Issuer
By
Name:
Title:
TRENDWEST RESORTS, INC., as Servicer and for itself
By
Name:
Title:
SAGE SYSTEMS, INC., as Subservicer
By
Name:
Title:
LASALLE NATIONAL BANK, as Trustee
By
Name:
Title:
<PAGE>
================================================================================
===============================================================================
EXHIBIT A
FORM OF
REPORT OF INDEPENDENT ACCOUNTANTS
<PAGE>
===============================================================================
================================================================================
EXHIBIT B
PERMITTED CHANGES TO PROPERTY MANAGEMENT AGREEMENT
1. The right of entry into resort units provision of the agreement may be
amended to accommodate emergency situations.
2. The permitted percentage interest that Trendwest has in an entity which
contracts with Trendwest may be decreased.
3. The maximum management fees paid to Trendwest may be decreased.
4. The Advances and Reimbursements provision may be amended so that
WorldMark will reimburse Trendwest for sums which were advanced by Trendwest at
Trendwest's cost rather than at a set interest rate.
5. The provision of the agreement authorizing Trendwest to pay itself its
management fee, reimbursements and authorized expenses may be amended to require
board approval should Trendwest seek reimbursement of expenses in excess of the
budgeted amount for such expenses.
6. The competition provision of the agreement may be amended so that
employees and managers of Trendwest and WorldMark may not in any way obtain or
retain the services of the other's employees for a period of twelve months
following the termination or expiration of the agreement.
7. Information relating to the names and addresses of any person named in
the agreement may be updated as necessary.
===============================================================================
PURCHASE AND SALE AGREEMENT
between
TRENDWEST FUNDING II, INC.
("Seller")
and
TRENDWEST RESORTS, INC.
("Trendwest")
and
TRI FUNDING II, INC.
("Issuer")
Dated as of March 1, 1998
===============================================================================
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE 1 DEFINITIONS..................................................2
Section 1.01. Defined Terms................................................2
ARTICLE 2 ACQUISITION OF PURCHASED ASSETS..............................3
Section 2.01. Purchase Asset Acquisition...................................3
Section 2.02. Grant of Security Interest...................................4
Section 2.03. Purchased Asset Price........................................4
Section 2.04. Delivery of Contracts; Filing of Financing Statements........4
Section 2.05. Servicing of Contracts and Credits...........................4
Section 2.06. Review of Contracts..........................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTEES...............................5
Section 3.01. Representations and Warranties of the Seller.................5
Section 3.02. Representations and Warranties of the Issuer................12
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties..............................14
Section 3.04. Requirements for Purchase or Substitution of
Receivables; Upgrades..............................14
ARTICLE 4 COVENANTS................................................16
Section 4.01. Seller and Trendwest Covenants..............................16
Section 4.02. Issuer Covenants............................................20
Section 4.03. Assignment of Purchased Assets..............................21
ARTICLE 5 CONDITIONS PRECEDENT........................................21
Section 5.01. Conditions to the Issuer's Initial Obligations..............21
Section 5.02. Conditions to the Sellers' Obligations......................22
ARTICLE 6 TERM AND TERMINATION........................................23
Section 6.01. Term........................................................23
Section 6.02. Default by the Seller or Trendwest..........................23
ARTICLE 7 MISCELLANEOUS...............................................23
Section 7.01. Amendments..........................................23
Section 7.02. Governing Law.......................................23
Section 7.03. Notices.............................................23
Section 7.04. Separability Clause.................................24
Section 7.05. Assignment..........................................24
Section 7.06. Further Assurances..................................24
Section 7.07. No Waivers; Cumulative Remedies.....................24
Section 7.08. Binding Effect; Third Party Beneficiaries...........24
Section 7.09. Set-Off.............................................24
Section 7.10. Counterparts........................................25
Signature Page..............................................................26
ANNEX A -- FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS AND UPGRADE
CONTRACTS
EXHIBIT A -- FORM OF CONTRACT
EXHIBIT B -- FORM OF ASSIGNMENT
EXHIBIT C -- FORM OF SUBSEQUENT ASSIGNMENT
EXHIBIT D -- FORM OF SUBORDINATED NOTE
<PAGE>
===============================================================================
===============================================================================
THIS PURCHASE AND SALE AGREEMENT, dated as of March 1, 1998 (this
"Agreement"), by and among Trendwest Funding II, Inc., a Delaware special
purpose corporation (herein, together with its permitted successors and assigns,
the "Seller"), Trendwest Resorts, Inc., an Oregon corporation (herein, together
with its permitted successors and assigns, "Trendwest") and TRI Funding II,
Inc., a Delaware special purpose corporation (herein, together with its
permitted successors and assigns, the "Issuer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of March 1, 1998 (as
amended and supplemented from time to time, the "Indenture"), with LaSalle
National Bank, as trustee (herein, together with its permitted successors and
assigns, the "Trustee"), and Trendwest, as servicer (herein, together with its
permitted successors and assigns, the "Servicer"), pursuant to which the Issuer
intends to issue its notes, issuable in one or more Series (collectively, the
"Notes") as provided in the Indenture, limited as to principal amount as set
forth in the related Series Supplement.
In furtherance thereof, the Issuer, Trendwest, and the Seller have
entered into this Agreement to provide for, among other things, the purchase by
the Issuer of all of the right, title and interest in and to the Purchased
Assets and a security interest in the Contracts and the related Credits, which
the Issuer is pledging to the Trustee, and in which the Issuer will be granting
to the Trustee a security interest, as security for the Notes. As a precondition
to the effectiveness of this Agreement, the Issuer, the Trustee, the Subservicer
and the Servicer will enter into the Servicing Agreement, dated as of March 1,
1998 (as amended and supplemented from time to time, the "Servicing Agreement"),
to provide for the administration and servicing of the Purchased Assets. In
connection with the issuance of each Series of Notes and pursuant to this
Agreement, the Seller from time to time will sell the Purchased Assets to the
Issuer. The initial sale shall be effected by this Agreement and an Assignment
from the Seller to the Issuer, and the list of Contracts relating to the
Purchased Assets so conveyed shall be listed on Schedule I to such Assignment.
Subsequent sales shall be effected by this Agreement and Subsequent Assignments
from the Seller to the Issuer, and the list of Contracts relating to each
conveyance of Purchased Assets shall be listed on Schedule I to the related
Subsequent Assignment.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Servicing Agreement, and the Seller agrees that all
covenants and agreements made by it in this Agreement with respect to the
Purchased Assets supporting each Series of Notes shall also be for the benefit
and security of the Trustee and all holders from time to time of the Notes of
such Series. In consideration for the Purchased Assets and its representations,
warranties, covenants and other agreements under this Agreement, on the Closing
Date the Seller will receive payment from the Issuer of cash, a Subordinated
Note and all of the common stock of the Issuer, and, in connection with the
issuance of subsequent Series of Notes, the Seller will receive cash and, to the
extent necessary, a Subordinated Note.
ARTICLE 1DEFINITIONS
Section 1.01. Defined Terms. For purposes of this Agreement the
following terms shall have the meanings specified herein. Capitalized terms used
herein but not otherwise defined shall have the respective meanings assigned to
such terms in the Indenture.
"Assignment" shall mean the Assignment, substantially in the form
attached hereto as Exhibit B, which shall be entered into in connection with the
conveyance of Receivables from the Seller to the Issuer on the Closing Date.
"Contract File" shall mean, with respect to each Contract, the
following documents:
(i) a copy of the Contract;
(ii) notice of assignment; and
(iii) any other documents or papers relating to servicing the Receivables.
"Contracts" shall mean the retail installment contracts which are sold to
the Issuer under this Agreement by the Seller.
"Custodian" shall mean Sage Systems, Inc. and its permitted successors and
assigns.
"Custodian File" shall mean, with respect to each Contract, the following
documents:
(i) the original Contract; and
(ii) notice of assignment.
"Issuer Address" shall mean 3250 Lakeport Boulevard, Klamath Falls, Oregon
97601.
"Electronic Ledgers" shall mean the electronic master records of all
contracts of the Issuer or the Servicer similar to and including the Contracts.
"Eligible Contract" shall mean a Contract that satisfies the selection
criteria set forth in Section 3.01(a) hereof and which is aged at least four
months, provided that with respect to any Substitute Contract, any reference in
such Section to Series Cut-Off Date shall be deemed to refer to the date as of
which the Substitute Receivable is conveyed to the Issuer in accordance with
Section 3.04 hereof.
"Indenture" shall mean the Indenture, dated as of March 1, 1998, by and
among the Issuer, the Trustee and the Servicer, as amended and supplemented from
time to time.
"Purchased Asset Price" shall mean an amount equal to the aggregate
principal amount outstanding on the Receivables relating to a Series as of the
related Series Cut-Off Date.
"Purchased Assets" shall mean all of the Seller's right, title and
interest in and to (a) the Receivables, including the proceeds thereof and all
payments received on or with respect to the Receivables and due after the
related Series Cut-Off Date, (b) a security interest in the related Contracts
(c) the Contract Files and the Custodian Files, (d) the Seller's rights and
interests in the related Credits, (e) the Servicing Charges with respect to the
Contracts, (f) all rights and interests of the Seller under the Receivables
Purchase Agreement, and (g) all income and proceeds of the foregoing or relating
thereto.
"Seller Address" shall mean 3250 Lakeport Boulevard, Klamath Falls, Oregon
97601.
"Series Cut-Off Date" shall having the meaning set forth in the Indenture.
"Subsequent Assignment" shall mean the Subsequent Assignment, substantially
in the form attached hereto as Exhibit C, one of which shall be entered into in
connection with each conveyance of Receivables relating to each issuance of a
Series of Notes after the Closing Date.
"Substitute Contract" shall have the meaning set forth in Section 3.04(b)
hereof.
"Substitute Receivable" shall mean the Receivable related to a Substitute
Contract.
"Substitution Criterion" shall have the meaning set forth in Section
3.04(b) hereof.
"Substitution Date" shall mean the date a Contract is purchased or
substituted pursuant to Section 3.03 hereof; such date shall occur on the 25th
of each month or on the next Business Day if the 25th is not a Business Day.
"Upgrade" shall have the meaning set forth in the Indenture.
"Upgrade Contract" shall have the meaning set forth in the Indenture.
ARTICLE 2 ACQUISITION OF PURCHASED ASSETS
Section 2.01. Purchase Asset Acquisition. In return for the
applicable Purchased Asset Price and other rights created by this Agreement, the
Seller hereby transfers, assigns, sells, and grants, without recourse except as
provided in Section 3.03 of this Agreement, on the related Series Closing Date
any and all of the Seller's respective right, title and interest in and to all
of the Purchased Assets relating to the Contracts set forth on Schedule I to the
Assignment or Subsequent Assignment, as the case may be, including the proceeds
of the Receivables and all payments received on or due after the related Series
Cut-Off Date and all income and proceeds of the foregoing or relating thereto.
The Seller hereby acknowledges that each transfer of the Purchased Assets to the
Issuer is absolute and irrevocable, without reservation or retention of any
interest whatsoever by the Seller.
Section 2.02. Grant of Security Interest. The Seller hereby pledges,
grants and assigns to the Issuer a security interest in the Seller's right,
title and interest in the Contracts and the related Credits to secure the
Seller's performance of its obligations hereunder and the payment of the
obligations of the Obligors under each Contract, and this Agreement shall
constitute a security agreement for such purpose under applicable law.
Section 2.03. Purchased Asset Price. By the execution of the
Assignment or Subsequent Assignment, as applicable, subject to all the terms and
conditions of this Agreement and in reliance upon the representations,
warranties and covenants set forth in this Agreement, on the related Series
Closing Date, the Issuer hereby agrees to pay the Purchased Asset Price
simultaneously with the related issuance of Notes. The Purchased Asset Price
shall be paid in the form of cash or in such other form as the Seller and the
Issuer may agree.
Section 2.04. Delivery of Contracts; Filing of Financing Statements.
(a) In connection with the Issuer's acquisition of the Purchased Assets, the
Seller, on behalf of the Issuer, shall deliver, or cause the delivery of, the
original Contracts to the Custodian so that the Custodian may retain possession
thereof as provided in the Transaction Documents. In addition, the Seller agrees
to execute and Trendwest agrees to record and file prior to each Series Closing
Date, at its own expense, financing statements (and thereafter timely
continuation statements with respect to such financing statements) with respect
to the applicable Purchased Assets, in accordance with Section 3.01(a)(viii) and
Section 4.01(c) hereof.
(b) In connection with each such acquisition, Trendwest shall
promptly, at its own expense, cause any Electronic Ledger maintained by it or
the Seller to be marked to show which Purchased Assets have been acquired by the
Issuer in accordance with this Agreement and pledged by the Issuer to the
Trustee in accordance with the Transaction Documents.
(c) It is the intention of the Seller and the Issuer that the Issuer
is acquiring full and absolute title to the Purchased Assets. If it is
determined, however, that the Seller has transferred to the Issuer a security
interest in the Purchased Assets, then this Agreement shall constitute a
security agreement under applicable law, and the Seller does hereby pledge,
grant and assign to the Issuer a security interest in the Purchased Assets.
Section 2.05. Servicing of Contracts and Credits. The Servicer shall
service the Receivables, the Contracts, the related Credits and the other
Purchased Assets for the benefit of the Issuer (and its successors and assigns)
in accordance with the terms and conditions of the Transaction Documents.
Notwithstanding the foregoing, Trendwest acknowledges and agrees that its
obligations under this Agreement are independent of any obligations it may have
under the other Transaction Documents and that its obligations under this
Agreement will continue in full force and effect until termination of this
Agreement in accordance with Section 6.01 hereof, unless otherwise provided
herein.
Section 2.06. Review of Contracts. If either of Trendwest or the
Custodian (who shall thereupon notify Trendwest and the Trustee) discovers that
any Contracts are missing or defective (that is, mutilated, damaged, defaced,
incomplete, improperly dated, clearly forged or otherwise physically altered) in
any material respect, Trendwest shall correct or cure such omission, defect or
other irregularity within 30 days from the date Trendwest discovered such
omission or defect, or from the date Trendwest is notified by the Custodian of
such omission or defect. In the event Trendwest is unable to correct or cure
such omission, defect or irregularity within the 30 day period described in the
preceding sentence, Trendwest shall purchase or replace such Receivable from the
Issuer in accordance with Section 3.03 hereof.
ARTICLE 3 REPRESENTATIONS AND WARRANTEES
Section 3.01. Representations and Warranties of the Seller. The
Seller, with respect to itself and the Receivables, the Contracts and related
Credits, and Trendwest, with respect to the Contracts, Receivables, the related
Credits, and the Seller, hereby make the following representations and
warranties to the Issuer for the benefit of the Trustee and Holders of the
Notes, on which the Issuer relies in acquiring the Receivables and on which the
Holders of each Series of Notes rely in purchasing such Notes; provided,
however, that with respect to the representations and warranties relating to the
Assets, the Holders of Notes of any Series only rely on such representations and
warranties to the extent such Assets are part of the Series Trust Estate
supporting such Series of Notes. Such representations and warranties shall
survive any subsequent transfer, assignment, contribution or conveyance of the
Receivables and the security interest in the Contracts and related Credits and
any issuance of Notes.
(a) As to each Contract, as of the related Series Closing Date:
(i) The information set forth in the related Series Contract Schedule is
true and correct as of the related Series Cut-Off Date.
(ii) The rights with respect to the Contract are assignable by the lender
thereunder and its successors and assigns without the consent of any Person.
(iii) Trendwest or the Seller has heretofore provided to the Custodian the
sole original counterpart of the Contract, together with any amendments, waivers
and modifications thereto, except original executed counterparts which have been
marked to show that they have been pledged by the Issuer to the Trustee under
the Indenture, and the terms of such Contract have not been amended, waived or
modified subsequent to the above being provided to the Custodian.
(iv) The Electronic Ledgers have been marked as provided in Section 2.04(b)
hereof.
(v) The Contract was not originated in, nor is it subject to the laws of,
any jurisdiction, the laws of which would make unlawful the sale, transfer or
assignment of such document under any of the Transaction Documents, including
any repurchase in accordance with the Transaction Documents.
(vi) The Contract is, and on the related Series Closing Date will be, in
full force and effect in accordance with its respective terms, and none of
Trendwest or the Seller or any Obligor has or will have suspended or reduced any
payments or obligations due or to become due thereunder by reason of a default
by the other party to such Contract; as of the related Series Closing Date, no
Scheduled Payment with respect to such Contract has not been received and
remains unpaid for a period of 30 or more days (without regard to advances, if
any, made by the Servicer), and there are no proceedings pending, or to the best
of the knowledge of Trendwest or the Seller, threatened asserting insolvency of
such Obligor; there has been no other default, breach or violation and no event,
other than relating to an Upgrade, permitting acceleration under such Contract;
there are no proceedings pending, or to the best of the knowledge of Trendwest
or the Seller, threatened, wherein such Obligor or any governmental agency has
alleged that such Contract is illegal or unenforceable; and none of the related
Scheduled Payments are subject to any set-off or credit of any kind.
(vii) The Contract is the valid, binding and legally enforceable obligation
of the parties thereto, enforceable in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of whether enforcement
is sought in a court of law or equity.
(viii) All actions, filings (including UCC filings) and recordings as are
required by the Indenture and that may be necessary to perfect, with respect to
the applicable Series Trust Estate, a security interest of the Issuer and the
Trustee in, and the sale by Trendwest, TW Holdings and the Prior Issuer to the
Seller of the Contract and the related Receivables being acquired, and the sale
from the Seller to the Issuer of the Receivables being acquired and the transfer
of the security interest in the Purchased Assets (other than the Receivables,
TFI's right and interests under the Receivables Purchase Agreement and the
related proceeds and payments) hereunder have been accomplished and are in full
force and effect.
(ix) The Contract is identical to one of the form contracts attached as
Exhibit A hereto, except for either (i) such immaterial modifications or
deviations from the form contract which appear in such Contract, which
immaterial modifications or deviations will not have a material adverse effect
on the Holders of the Notes or (ii) such modifications or deviations as set
forth on Schedule I to the Assignment or Subsequent Assignment, as the case may
be, related to such Contract.
(x) The Contract was originated by Trendwest in Trendwest's ordinary course
of business and meets Trendwest's qualifications for originating vacation credit
installment contracts. The origination and collection practices used by
Trendwest and the Seller with respect to such Contract have been in all respects
legal, proper, prudent and customary in the vacation credit financing and
servicing business.
(xi) The Receivable is under a Contract that has a term to the last
Scheduled Payment Date of not more than 84 months (except for Contracts relating
to the Eagle Crest resort, which have a term to the last Scheduled Payment Date
of not more than 120 months) and not less than one month.
(xii) The Contract obligates the related Obligor to make all Scheduled
Payments thereunder in full notwithstanding the collection by Trendwest of a
security deposit with respect thereto. The calculation of the Collateral Value
of the related Receivable does not include any security deposits or similar
payments collected by or on behalf of Trendwest which are applied to Scheduled
Payments.
(xiii) All requirements of applicable federal, State and local laws, and
regulations thereunder, including, without limitation, usury laws, if any, in
respect of the Contract have been complied with in all material respects, and
such Contract complied in all material respects at the time it was originated or
made and now complies in all material respects with all legal requirements of
the jurisdiction in which it was originated.
(xiv) The Contract is not and will not be subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
whether arising out of transactions concerning such Contract or otherwise, and
the operation of any of the terms of such Contract or the exercise by the Seller
or the Obligor of any right under such Contract will not render such Contract
unenforceable in whole or in part, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto, except that
certain rights or defenses may exist under applicable law which, individually or
in the aggregate, do not make the remedies available to the Seller with respect
to such Contract inadequate for the practical realization of the benefits
provided thereby.
(xv) Each of the Seller and Trendwest has duly fulfilled all obligations on
the lender's part to be fulfilled under or in connection with the Contract,
including, without limitation, giving any notices or consents necessary to
effect the acquisition of the Purchased Assets by the Issuer and has done
nothing to impair the rights of the Issuer and the Noteholders in such Contract
or payments with respect thereto.
(xvi) The Seller's interest in the Contract, the Receivable and the related
Credits has not been sold, transferred, assigned or pledged by the Seller to any
Person other than the Issuer (except for such interests in the Purchased Assets
which shall be terminated on or prior to the related Series Closing Date), and
upon execution and delivery hereof and of the Assignment by the Seller and the
payment by the Issuer of the related Purchased Asset Price, the Issuer will have
all of the right, title and interest in Receivables and a security interest in
the Contracts and the related Credits, free and clear of all liens and
encumbrances, except for the interests of the Obligor pursuant to such Contract.
Such Contract has not been satisfied, subordinated or rescinded.
(xvii) Neither the Seller nor Trendwest has any specific knowledge that the
Contract will not be fully performed in accordance with its terms.
(xviii) The Obligor has made the first Scheduled Payment (which payment may
be an advance payment under such Contract) due under the Contract within the
time set forth in such Contract.
(xix) The related Obligor is located in the United States of America or
Canada, and the related Scheduled Payments are payable in U.S. dollars.
(xx) Except for changes due to Upgrades, the related Scheduled Payments
were established at the time such Contract was originated.
(xxi) There are no unpaid brokerage or other fees owed to third parties
relating to the origination of the Contract.
(xxii) The Contract cannot be rescinded pursuant to applicable consumer
finance laws.
(xxiii) The contract was originated in compliance with the requirements of
all federal, state and local laws, rules and regulations applicable to the
origination of the Contract (including, without limitation, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief
Act of 1940, and any other federal, state and local laws relating to interest,
usury, consumer credit, equal credit opportunity, fair credit reporting,
privacy, consumer protection, false or deceptive trade practices and disclosure,
the Mail Fraud statute and any timeshare disclosure), non-compliance with which
could have a material adverse effect on the enforceability or value of the
Contract.
(xxiv) All Scheduled Payments are due and payable monthly and such
Scheduled Payments are level payments throughout the terms of the Contracts.
(b) As to the aggregate pool of Contracts supporting a Series of Notes as
of the related Series Closing Date, neither Trendwest nor the Seller used any
selection procedures that identified the Contracts as being less desirable or
valuable than other comparable vacation credit installment contracts originated
by Trendwest.
(c) As to the Seller as of each Series Closing Date:
(i) The Seller has been duly organized and is validly existing and in good
standing as a corporation under the laws of the State of Delaware with corporate
power and authority to own its properties and to transact the business in which
it is now engaged, and the Seller is duly qualified to do business in and is in
good standing under the laws of each State in which its business is located or
is not required under applicable law to effect such qualification, except where
failure to so qualify would not have a material adverse effect on the ability of
the Seller to perform its obligations under the Transaction Documents or on any
of the Contracts, the Receivables or the Credits or on the ability of the
Seller, the Issuer or the Trustee to realize upon or enforce the same.
(ii) The performance of the obligations of the Seller under this Agreement
and the other Transaction Documents and the consummation of the transactions
herein and therein contemplated will not conflict with or result in any breach
of any of the terms or provisions of, or constitute with or without notice,
lapse of time or both, a default under the Certificate of Incorporation or
Bylaws of the Seller, or any material indenture, agreement, mortgage, deed of
trust or other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any lien, charge or
encumbrance (except the lien created by the Transaction Documents) upon any of
the property or assets of the Seller pursuant to the terms of such indenture,
mortgage, deed of trust, or other agreement or instrument to which the Seller is
a party or by which the Seller is bound or to which any of the Seller's property
or assets is subject, nor will such action result in any violation of the
provisions of the Seller's Certificate of Incorporation or By-laws or any
statute or any order, rule or regulation of any court or any regulatory
authority or other governmental agency or body having jurisdiction over the
Seller or any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with or other action of any court, or any
such regulatory authority or other governmental agency or body is required for
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents except such consents, approvals and authorizations which
have been obtained or such registrations or qualifications which have been made.
(iii) This Agreement and any other Transaction Document to which the Seller
is a party have been duly authorized, executed and delivered by the Seller by
all necessary corporate action and such agreements are the valid and legally
binding obligations of the Seller, enforceable against the Seller in accordance
with their respective terms, subject as to enforcement to applicable bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity regardless of whether enforcement is sought in a court of law or
equity.
(iv) The Seller Address is the chief executive office, principal place of
business and the office where the Seller keeps its records concerning the
Contracts, Receivables and the related Credits. The Seller has not used any
address other than its Seller Address in the previous five-year period. The
Seller's legal name is as set forth in this Agreement. The Seller has not used
or done business under any other name in the previous six-year period.
(v) The Seller does not believe, nor does it have any reasonable cause to
believe, that it cannot perform each and every covenant contained in this
Agreement.
(vi) The transactions contemplated by the Transaction Documents are being
consummated by the Seller in furtherance of its ordinary business purposes, with
no contemplation of insolvency and with no intent to hinder, delay or defraud
any of its present or future creditors.
(vii) The consideration received by the Seller pursuant to this Agreement
is fair consideration having value reasonably equivalent to or in excess of the
value of the performance of the Seller's obligations hereunder.
(viii) Neither on the date of the transactions contemplated by the
Transaction Documents or immediately before or after such transactions, nor as a
result of the transactions, will the Seller:
(A) be insolvent such that the sum of its debts is greater than all of its
respective property, at a fair valuation;
(B) be engaged in, or about to engage in, business or a transaction for
which any property remaining with the Seller will be an unreasonably small
capital or the remaining assets of the Seller will be unreasonably small in
relation to its respective business or the transaction; and
(C) have intended to incur, or believed it would incur, debts that would be
beyond its respective ability to pay as such debts mature or become due. The
Seller's assets and cash flow enable it to meet its present obligations in the
ordinary course of business as they become due.
(ix) Both immediately before and after the transactions contemplated by the
Transaction Documents (a) the present fair salable value of the Seller's assets
was or will be in excess of the amount that will be required to pay its probable
liabilities as they then exist and as they become absolute and matured; and (b)
the sum of the Seller's assets was or will be greater than the sum of its debts,
valuing its assets at a fair salable value.
(x) The acquisition of the Purchased Assets by the Issuer pursuant to this
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
(xi) There are no proceedings or investigations pending or, to the
knowledge of the Seller or Trendwest, threatened against or affecting the Seller
in or before any court, governmental authority or agency or arbitration board or
tribunal which, individually or in the aggregate, involve the possibility of
materially and adversely affecting the properties, business, prospects, profits
or condition (financial or otherwise) of the Seller, or the ability of the
Seller to perform its obligations under this Agreement or the other Transaction
Documents. The Seller is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(xii) All tax returns or extensions required to be filed by the Seller in
any jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon the Seller, or upon any of the respective
properties, income or franchises shown to be due and payable on such returns
have been, or will be, paid. All such tax returns are true and correct, and the
Seller has no knowledge of any proposed additional tax assessment against it in
any material amount nor of any basis therefor. The provisions for taxes on the
books of the Seller are in accordance with generally accepted accounting
principles.
(xiii) The Seller (i) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject, (ii) has not failed to
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct of its business,
and (iii) is not in violation in any material respect of any term of any
agreement, charter instrument, bylaw or instrument to which it is a party or by
which it may be bound which violation or failure to obtain might materially
adversely affect the business or condition (financial or otherwise) of the
Seller.
(xiv) It is the intention of the Seller that the Purchased Assets are being
or have been acquired by the Issuer and that the beneficial interest in and
title to the Purchased Assets are not part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.
(xv) Immediately prior to the acquisition of the Purchased Assets by the
Issuer pursuant to this Agreement, the Seller was the sole owner of such
Purchased Assets and the Contracts at such time and had a valid security
interest (or a security interest in a security interest) in the related Credits,
and had good and marketable title to such Purchased Assets, free and clear of
all liens, claims and encumbrances (except for the Purchased Assets Price and
security interests in the Purchased Assets and the Contracts which shall be
terminated on or prior to the related Series Closing Date); and the acquisition
of the Purchased Assets by the Issuer does not violate the terms or provisions
of any Contract.
(xvi) The Seller will treat the transfer of the Purchased Assets as a sale
to the Issuer for federal, State and local income tax reporting and accounting
purposes. The affiliated group of which the Seller is a member within the
meaning of Section 1504 of the Code shall treat the Purchased Assets as owned by
the Issuer for federal, state and local income tax purposes.
(xvii) The transfer of the Purchased Assets pursuant to this Agreement
constitutes the valid transfer by the Seller to the Issuer of all of the
Seller's right, title and interest in the Purchased Assets.
(xviii) The Seller has valid business reasons for selling the Purchased
Assets to the Issuer pursuant to this Agreement rather than obtaining a loan
secured by the Purchased Assets.
(xix) The Seller will be operated generally so as to not be substantively
consolidated with the Issuer.
(xx) No event has occurred that adversely affects the Seller's ability to
perform the transactions contemplated by the Transaction Documents.
(xxi) Each pension plan or profit sharing plan to which the Seller is a
party has been fully funded in accordance with the obligations of the Seller as
set forth in such plan.
(xxii) Neither the acquisition nor the holding of the Contracts and the
related Receivables violates any federal or State law, rule or regulation the
non-compliance with which could have a material adverse effect on the value of
the Contracts or the related Receivables.
Section 3.02. Representations and Warranties of the Issuer. The Issuer
hereby makes the following representations and warranties for the benefit of the
Trustee and Holders of the Notes, on which the Seller relies in entering into
this Agreement with the Issuer and on which the Holders of the Notes rely in
purchasing the Notes; such representations and warranties speak as of each
Series Closing Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Purchased Assets:
(a) The Issuer has been duly organized and is validly existing in good
standing as a corporation under the laws of the State of Delaware, with power
and authority to own its properties, perform its obligations under the
Transaction Documents and to transact the business in which it is now engaged or
in which it proposes to engage; the Issuer is duly qualified to do business and
is in good standing in each State in which the nature of its business requires
it to be so qualified, except where failure to so qualify would not have a
material adverse effect on the ability of the Issuer to perform its obligations
under the Transaction Documents.
(b) The transfer to and receipt by the Issuer of the Seller's interest in
the Receivables and a security interest in the Contracts and related Credits
pursuant to this Agreement and the consummation of the transactions contemplated
herein and in the Transaction Documents will not conflict with or result in
breach of any of the terms or provisions of, or constitute (with or without
notice, lapse of time or both) a default under the Certificate of Incorporation
or the By-laws of the Issuer or any material indenture, agreement, mortgage,
deed of trust or other instrument to which the Issuer is a party or by which it
is bound, or result in the creation or imposition of any lien, charge or
encumbrance (except for the lien created by this Agreement and the Indenture)
upon any of the property or assets of the Issuer pursuant to the terms of, such
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Issuer is a party or by which it is bound or to which any of the property or
assets of the Issuer is subject, nor will such action result in any violation of
the provisions of the Certificate of Incorporation or the By-laws of the Issuer
or any statute or any order, rule or regulation of any court or regulatory
authority or other governmental agency or body having jurisdiction over the
Issuer or any of its properties; and no consent, approval, authorization, order,
registration or qualification of or with or other action of any court or any
such regulatory authority or other governmental agency or body is required for
the acquisition of the Purchased Assets hereunder.
(c) The Transaction Documents have been duly authorized, executed and
delivered by the Issuer by all necessary action and constitute valid and legally
binding obligations of the Issuer enforceable against the Issuer in accordance
with their terms, subject as to enforcement to bankruptcy, insolvency,
reorganization and other similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a court of equity or law.
(d) There are no proceedings or investigations to which the Issuer is a
party pending or, to the knowledge of the Issuer, threatened, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality (a) asserting the invalidity of this Agreement, (b) seeking to
prevent the issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or (c) seeking any determination or ruling that
would materially and adversely affect the performance by the Issuer of its
obligations under, or the validity or enforceability of, this Agreement.
(e) All approvals, authorizations, consents, orders or other actions of any
Person or of any court, governmental agency or body or official, required in
connection with the execution and delivery of this Agreement, have been or will
be taken or obtained on or prior to the related Series Closing Date.
(f) The Issuer Address is the principal place of business and chief
executive office of the Issuer.
Section 3.03. PIurchase or Substitution Required upon Breach of Certain
Representations and Warranties. Upon discovery by the Seller, Trendwest or the
Issuer of the breach of any representations or warranties set forth in Section
3.01 or 3.02 hereof which materially and adversely affects the value of a
Contract, Receivable, the related Credits, or the interests of the Holders of
the Notes of any Series, or a breach of any of the representations and
warranties set forth in Sections 3.01(a)(v), 3.01(a)(vi), 3.01(a)(vii),
3.01(a)(xiii), 3.01(a)(xiv), 3.01(a)(xvi), 3.01(a)(xxii) or 3.01(a)(xxiii)
hereof, the party discovering such breach shall give prompt written notice to
the other parties. The Seller or Trendwest, with respect to the Contracts shall,
within 30 days from the date such Person was notified of, or otherwise
discovers, such breach, cure such breach, or, (1) if the breach relates to a
particular Contract and is not cured, either (a) purchase the Issuer's interest
in the related Receivable from the Issuer at the Purchase Price or (b) provide a
Substitute Receivable or (2) if the breach relates to a representation or
warranty regarding the selection criteria of the Contracts as a whole and is not
cured by the Seller or Trendwest, as applicable, either (a) purchase the
Issuer's interest in such non-conforming Contracts and the related Receivables
from the Issuer or (b) provide Substitute Receivables as set forth above, so
that the representations and warranties with respect to the selection criteria
are correct, as evidenced by a certificate of an officer of the Seller or
Trendwest, as applicable, to the Trustee. The Purchase Price for a purchased
Receivable shall be paid, and any Substitute Contract shall be delivered, by the
Seller or Trendwest to the Issuer in accordance with Section 3.04(c) hereof. It
is understood and agreed that the obligation of the Seller or Trendwest to cure
or purchase or replace any Receivable related to a Contract as to which such a
breach has occurred shall constitute the sole remedy respecting such breach
available to the Issuer, the Holders of Notes or the Trustee on behalf of such
Holders (except for any indemnities provided under Section 4.01(j) hereof or its
obligations under the related Indenture) for any losses, claims, damages and
liabilities arising from the Issuer's interest in such Receivable or the
inclusion of the Issuer's interest in such Receivable in the applicable Series
Trust Estate.
Section 3.04. Requirements for Purchase or Substitution of
Receivables; Upgrades. (a) If either the Seller or Trendwest is required to
purchase the Issuer's interest in any Receivable under Section 3.03 hereof or if
the Issuer is required or elects to purchase the Trustee's interest in any
Receivable under Section 3.10 of the Servicing Agreement, such Receivable shall
be purchased by the Seller or Trendwest at the Purchase Price. All purchases
shall be accomplished at the times specified in subsection (c) below.
(b) If the Seller or Trendwest is required to substitute any
Receivable related to a Contract under Section 3.03 hereof, or if the Issuer is
required or elects to substitute any Receivable related to a Contract under
Section 3.10 of the Servicing Agreement (a "Substitute Contract"), each such
Substitute Contract shall (i) be an Eligible Contract; (ii) be written on one of
the standard forms attached as Exhibit A to this Agreement; (iii) be accompanied
by a supplement to this Agreement substantially in the form of Annex A hereto
subjecting such Contract to the provisions hereof and providing with respect to
such Substitute Contract the information required in the related Series Contract
Schedule; (iv) not have been selected using procedures that identified the
Contracts as being less desirable or valuable than other comparable vacation
credit retail installment contracts originated by Trendwest and (v) not have any
Scheduled Payments that are due after the Stated Maturity Date of the Notes of
the Series supported by such Contract. In addition, (i) such Substitute
Contracts shall have an aggregate Collateral Value at least equal to and not
materially greater than the aggregate Collateral Value of the Contracts being
withdrawn as of the date of withdrawal (the "Substitution Criterion") and (ii)
the representations and warranties set forth in Sections 3.01 and 3.02 shall be
true and correct with respect to such Substitute Contract and the aggregate pool
of Contracts as of the date the Substitute Receivable is conveyed to the Issuer.
Upon the substitution of any Substitute Receivable pursuant to the
provisions of this Section 3.04(b), the Seller and Trendwest hereby agree that
such Substitute Receivable will be subject to all the terms and provisions of
this Agreement, the Servicing Agreement, the Custodian Agreement and the
Indenture just as if such Substitute Receivable and the related Substitute
Contract had been one of the original Contracts the related Receivable of which
was acquired on the applicable Series Closing Date. Upon the substitution of a
Substitute Receivable pursuant to this Section 3.04(b), the Issuer and the
Seller shall also comply with the provisions and limitations set forth in the
Indenture. All substitutions shall be accomplished at the time specified in
subsection (c) below.
(c) Any purchase or substitution of a Receivable related to a
Contract by the Seller in accordance with Section 3.03 hereof or this Section
3.04 or by the Issuer under Section 3.10 of the Servicing Agreement shall be
made either by remittance of the Purchase Price to the Subservicer for deposit
into the Clearing Account in accordance with Section 3.03(a) of the Servicing
Agreement or by substitution of a Substitute Receivable, as applicable, within
one Business Day following the expiration of the cure period set forth in
Section 3.03 hereof.
(d) Any voluntary purchase or substitution of a Receivable related to
a Contract by the Issuer pursuant to the terms of the Servicing Agreement or
Indenture in the event of a default, delinquency or modification with respect to
such Contract shall satisfy the same requirements for a purchase or
substitution, as the case may be, as are set forth in this Section 3.04.
(e) If an Obligor desires to enter into an Upgrade Contract,
Trendwest, as Servicer, shall inform the Issuer of such fact. In such event, if
the Issuer desires to purchase the Receivable related to such Upgrade and so
advises Trendwest, Trendwest for the benefit of the Issuer may (but shall not be
obligated to) to enter into an Upgrade Contract with such Obligor and transfer
such Upgrade Contract to TFI, which shall simultaneously transfer the related
Receivable and pledge such Upgrade Contract to the Issuer. The Issuer shall pay
to TFI an amount equal to the difference in the principal balance between the
existing Contract and the Upgrade Contract (which amount shall be paid to TFI by
increasing the amount owed by the Issuer under the Subordinated Note); provided,
however, that (i) such Upgrade Contract has an interest rate that is not more
than 1.0% per annum lower than the interest rate on the Contract that is being
replaced, (ii) each Scheduled Payment under the Upgrade Contract shall be the
equal to or greater than the Scheduled Payments on the existing Contract, (iii)
such Obligor has made all Scheduled Payments due on or before the date of such
Upgrade, (iv) such Upgrade Contract is written on one of the standard forms
attached as Exhibit A to this Agreement, (v) simultaneous with the execution of
the Upgrade Contract, Trendwest shall execute a form of assignment to TFI, which
will immediately execute an assignment to the Issuer attached to such Upgrade
Contract, and indicate on the face of the Upgrade Contract that the related
Receivable is being sold to the Issuer and pledged to the Trustee pursuant to
the Indenture, (vi) such Upgrade Contract shall be delivered by Trendwest to the
Custodian immediately after execution of such contract by the Obligor, WorldMark
and Trendwest (and, in any event, prior to the release of the original
Contract), (vii) the transfer of the related Receivable shall not be effective
(and the lien of the Trustee on the existing Contract and the related Receivable
shall not be released) until after any applicable rescission period has expired
and (viii) clauses (i)-(vii) above shall be representations and warranties of
Trendwest, and Trendwest shall be obligated to purchase from the Issuer the
Receivable related to any Upgrade Contract that does not comply with such
representations and warranties. Simultaneous with the delivery of such Upgrade
Contract to the Custodian, TFI shall deliver to the Trustee a supplement to this
Agreement substantially in the form of Annex A hereto subjecting such Contract
to the provisions hereof and providing with respect to such Upgrade Contract the
information required on the Contract Schedule. TFI shall pay to Trendwest,
through an increase in the intercompany debt between TFI and Trendwest, for such
Upgrade Contract an amount equal to the difference between the principal balance
of the Upgrade Contract on the date of such Upgrade and the Collateral Value of
the Contract being prepaid because of such Upgrade as of such date.
Upon the acquisition by the Issuer of the Receivable related to any
Upgrade Contract pursuant to the provisions of this Section 3.04(e), Trendwest
hereby agrees that such Upgrade Contract and the related Receivable will be
subject to all the terms and provisions of this Agreement, the Receivables
Purchase Agreement, the Servicing Agreement and the Indenture just as if such
Upgrade Contract had been one of the original Contracts acquired on a Series
Closing Date.
ARTICLE 4 COVENANTS
Section 4.01. Seller and Trendwest Covenants. The Seller (and Trendwest,
with respect to subsections (c), (j), (n) and (q) of this Section 4.01) hereby
covenants and agrees with the Issuer as follows:
(a) Except as hereinafter provided, the Seller will keep in full effect its
existence, rights and franchises as a corporation, and will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement or any of the Contracts and to perform its
duties hereunder. Any person into which the Seller may be merged or
consolidated, or to whom the Seller has sold substantially all of its assets, or
any corporation resulting from any merger, conversion or consolidation to which
the Seller shall be a party, or any Person succeeding to the business of the
Seller shall be the successor of the Seller 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; provided, however, that (w)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.01(c) hereof shall have been breached, (x)
such successor executes an agreement of assumption, in form reasonably
satisfactory to the Trustee, to perform every obligation under this Agreement,
(y) the Seller shall have delivered to the Issuer a certificate of an officer of
the Seller and an Opinion of Counsel each stating that such consolidation,
merger, or succession and such agreement of assumption complies with this
Section 4.01 and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and (z) the
Seller shall have delivered to the Issuer an Opinion of Counsel either (1)
stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to preserve and protect the interest of the Issuer in the
Contracts and reciting the details of such filings, or (2) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest.
(b) Neither the Seller nor any of the directors, officers, employees or
agents of the Seller shall be under any liability to the Issuer, the Trustee or
the Holders of Notes for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment
not involving recklessness or negligence; provided, however, that this provision
shall not protect the Seller against any breach of warranties or representations
made herein, or failure to perform its obligations in strict compliance with
this Agreement, or any liability which would otherwise be imposed by reason of
any breach of the terms and conditions of this Agreement. The Seller, and any
director, officer, employee or agent of the Seller, may rely in good faith on
any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. The Seller shall not be under
any obligation to appear in, prosecute, or defend any legal action that is not
incidental to its obligations as the seller of the Purchased Assets under this
Agreement and that in its opinion may involve it in any expense or liability.
(c) Trendwest and the Seller will from time to time, at Trendwest's
expense, execute and file such additional financing statements (including
continuation statements) as may be necessary or which the Trustee may deem
appropriate to preserve the security interests and liens described in Section
3.01(a)(viii) hereof and are reasonably satisfactory in form and substance to
the Issuer.
(d) The Seller will not change its name, identity or corporate structure in
any manner that would, could, or might make any financing statement or
continuation statement misleading within the meaning of section 9-402(7) of the
UCC, unless it shall have given the Issuer and the Trustee at least 30 days'
prior written notice thereof.
(e) The Seller will give the Issuer and the Trustee at least 30 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement.
(f) The Seller will duly fulfill all obligations on its part to be
fulfilled under or in connection with each Contract and will not change or
modify the terms of the Contracts except as expressly permitted by the terms of
the Transaction Documents and will do nothing to impair the rights of the Issuer
or the Trustee in the Purchased Assets. In the event that the rights of the
Seller sold hereunder to the Issuer under any Contract or any guaranty of the
related Obligor's obligations under any Contract are not assignable to the
Issuer, the Seller will enforce such rights on behalf of the Issuer; the Seller
is not aware of any such inability to assign any Contracts.
(g) The Seller will comply, in all material respects, with all material
acts, rules, regulations, orders, decrees and directions of any governmental
authority applicable to the Purchased Assets or any part thereof; provided,
however, that the Seller may contest any act, regulation, order, decree or
direction in any reasonable manner which shall not materially and adversely
affect the rights of the Issuer or the Trustee in the Purchased Assets.
(h) The Seller will advise the Issuer and the Trustee promptly, in
reasonable detail, of the occurrence of any breach by the Seller following
discovery by the Seller of such breach of any of its representations, warranties
and covenants contained herein.
(i) The Seller will execute or endorse, acknowledge, and deliver to the
Issuer and the Trustee from time to time such schedules, confirmatory
assignments, conveyances, and other reassurances or instruments and take such
further similar actions relating to the Purchased Assets, and the rights covered
by the Transaction Documents, as the Issuer or the Trustee may reasonably
request to preserve and maintain title to the Purchased Assets and the rights of
the Trustee and the Holders of Notes therein against the claims of all persons
and parties.
(j) Trendwest agrees to indemnify, defend and hold the Issuer harmless from
and against any and all loss, liability, damage, judgment, claim, deficiency or
expense (including interest, penalties, reasonable attorney's fees and amounts
paid in settlement) that is caused by (i) a material breach at any time by the
Seller or Trendwest of its representations, warranties and covenants contained
in Section 3.01 hereof or this Section 4.01 or (ii) any material information
furnished by the Seller which is set forth in any schedule delivered hereunder,
being untrue in any material respect when any such representation was made or
schedule delivered, provided that neither Trendwest nor the Seller shall have
any liability with respect to a representation or warranty as to any specific
Contract, Receivable or the related Credits other than to purchase the related
Receivable or substitute for such Receivable in accordance with Section 3.03
hereof unless such breach of representation or warranty is the result of the
fraud, negligence, bad faith or willful misconduct of the Seller or Trendwest.
Trendwest shall also indemnify the Trustee and the Servicer for any cost or
expenses incurred by them in the enforcement of this Agreement. The obligations
of Trendwest under this Section 4.01(j) shall be considered to have been relied
upon by the Issuer and shall survive the execution, delivery and performance of
this Agreement, regardless of any investigation made by or on behalf of the
Issuer, until termination of the Indenture. If either Trendwest or the Seller
has made any indemnity payments pursuant to this Section 4.01(j) and thereafter
the recipient collects any of such amounts from others, such party will promptly
repay the amount collected to either Trendwest or the Seller, as applicable,
without interest.
(k) The Seller will do nothing to disturb or impair the acquisition
hereunder by the Issuer of all of the Seller's right, title and interest in the
Purchased Assets and interest in the Contracts and related Credits.
(l) The Seller (i) will (A) maintain its books and records separate from
the books and records of the Issuer and (B) maintain bank accounts separate from
those of the Issuer and (ii) will not, prior to the payment of the Notes, (x)
take any action that would cause the dissolution or liquidation of the Issuer,
(y) guarantee (directly or indirectly), endorse or otherwise become contingently
liable (directly or indirectly) for the obligations of the Issuer or (z)
institute against the Issuer, or join any other person in instituting against
the Issuer, any case, proceeding or other action under any existing or future
bankruptcy, insolvency or similar laws.
(m) The Seller shall notify the Issuer and the Trustee promptly after
becoming aware of any Lien on any Purchased Asset.
(n) On each date as of which Trendwest or the Seller substitutes a
Receivable related to a Substitute Contract in accordance with Section 3.03
hereof, Trendwest or the Seller shall provide to the Issuer a supplement to this
Agreement substantially in the form of Annex A hereto subjecting such Contract
and the related Receivable to the provisions hereof and providing with respect
to the Substitute Contract the information required in the Contract Schedule.
(o) The annual financial statements of the Seller will disclose the effects
of the transactions contemplated by the Transaction Documents in accordance with
generally accepted accounting principles. The resolutions, agreements and other
instruments underlying the Transaction Documents will be continuously maintained
by the Seller as official records.
(p) The affiliated group of which the Seller is a member within the meaning
of Section 1504 of the Code shall treat the Receivables as owned by the Issuer
for federal, state and local income tax purposes.
(q) Trendwest will, at its own cost and expense, (i) retain the Electronic
Ledger as a master record of the Receivables, the Contracts and the related
Credits and copies of all documents relating to each Contract (other than the
original executed Contracts) as custodian for the Issuer and other Persons, if
any, with interests in the Receivables, the Contracts and related Credits and
(ii) mark the Contracts and the Electronic Ledger to the effect that the
Receivables and a security interest in, the related Credits have been acquired
by the Issuer and that they have been transferred and assigned to the Trustee
pursuant to the Indenture.
(r) The Seller will perform the transactions contemplated by this Agreement
in a manner that is consistent with the Issuer's ownership interest in the
Purchased Assets. The Seller will respond to all third party inquiries
confirming the transfer of the Purchased Assets to the Issuer.
(s) The Seller shall immediately transfer to Servicer for deposit in the
Clearing Account any payment it receives relating to the Purchased Assets.
(t) The Seller will not amend its Certificate of Incorporation or its
By-laws without the prior written consent of the Trustee and the Holders of a
majority in principal amount of Notes Outstanding.
Section 4.02. Issuer Covenants. The Issuer hereby covenants and agrees with
the Seller as follows:
(a) The Issuer hereby acknowledges and agrees that its rights in the
Receivables, the Contracts and related Credits are expressly subject to the
rights of the related Obligors in such Receivables, Contracts and Credits
pursuant to the related Contract.
(b) On each date as of which any interest in any Receivable is to be
purchased or replaced by Trendwest or the Seller pursuant to Section 3.03
hereof, the Issuer shall submit to Trendwest or the Seller an instrument of
assignment assigning the Issuer's interest in such Receivable and the related
Credits to Trendwest or the Seller, as applicable, signed by the president,
senior vice president or any vice president of the Issuer. Each such assignment
shall operate as an assignment, without recourse, representation, or warranty,
to Trendwest or the Seller, as applicable, of all of the Issuer's right, title,
and interest in and to such Receivable, the related Contract, the related
Credits and any security documents relating thereto, such assignment being an
assignment outright and not for security, and upon payment of the Purchase Price
or delivery of a Substitute Contract, Trendwest or the Seller, as applicable,
will thereupon own such interest in the related Receivable and all such security
and documents, free of any further obligation to the Issuer with respect
thereto. If in any enforcement suit or legal proceeding it is held that
Trendwest or TFI, as applicable, may not enforce such Contract on the ground
that it is not a real party in interest entitled to enforce such Contract, the
Issuer shall, at the Issuer's expense, take such steps as the Issuer deems
necessary to enforce such Contract, including bringing suit in the Issuer's
name.
(c) The Issuer warrants that it will have a valid security interest in the
Contracts and related Credits and that it will warrant and defend such interest
in such Contracts and Credits against all Persons, claims and demands
whatsoever. The Issuer shall not assign, sell, pledge, or exchange, or in any
way encumber or otherwise dispose of the Contracts or the related Credits,
except as permitted under the Transaction Documents.
(d) The Issuer shall treat Purchased Assets as owned by it for federal,
State and local income tax purposes, shall include in the computation of its
gross income for such purposes the other income from the Purchased Assets, shall
treat the Notes as its debt for such purposes and shall deduct the interest paid
or accrued with respect to the Notes in accordance with its applicable method of
accounting for such purposes.
Section 4.03. Assignment of Purchased Assets. Trendwest and the Seller
understand that the Issuer will assign to and grant to the Trustee a security
interest in all its right, title and interest to this Agreement, the Contracts,
the related Credits and the Purchased Assets. Trendwest and the Seller consent
to such assignment and grant and further agree that all representations,
warranties, covenants and agreements Trendwest or the Seller made herein shall
also be for the benefit of and inure to the Trustee and all Holders from time to
time of the Notes.
ARTICLE 5 CONDITIONS PRECEDENT
Section 5.01. Conditions to the Issuer's Initial Obligations. The
obligations of the Issuer to execute and deliver the applicable Assignment to
the Seller on each Series Closing Date pursuant to, and perform it obligations
pursuant to, this Agreement shall be subject to the satisfaction of the
following conditions:
(a) All representations and warranties of the Seller and Trendwest
contained in Sections 3.01(b) and 3.01(c) hereof and all information provided in
the related Series Contract Schedule shall be true and correct on such Series
Closing Date, with the same effect as though such representations and warranties
had been made on such date, and the Seller and Trendwest shall have delivered to
the Issuer, the Trustee and each original purchaser of the related Series of
Notes an Officer's Certificate to such effect;
(b) All representations and warranties of the Seller and Trendwest
contained in Section 3.01(a) hereof shall be true and correct on such Series
Closing Date with respect to the Contracts listed on the related Series Contract
Schedule, with the same effect as though such representations and warranties had
been made on such date, and the Seller and Trendwest shall have delivered to the
Issuer, the Trustee and each original purchaser of the related Series of Notes
an Officer's Certificate to such effect;
(c) The Seller shall have delivered all other information theretofore
required or reasonably requested by the Issuer to be delivered by the Seller
hereunder, duly certified by an officer of the Seller, and the Seller shall have
substantially performed all other obligations required to be performed as of
such Series Closing Date by the provisions of this Agreement;
(d) On or prior to such Series Closing Date, the Seller shall have
delivered, or caused the delivery of, the Custodian Files related to the
Contracts identified in the Contract Schedule to the Custodian or its agent and,
subject to Section 2.04 hereof, there shall have been made all filings,
recordings and/or registrations, and there shall have been given, or taken, any
notice or any other similar action, as may be necessary in the opinion of the
Issuer, in order to establish and preserve the right, title and interest of the
Issuer in the Purchased Assets;
(e) On or before the Closing Date, the Issuer, the Servicer, the
Subservicer and the Trustee shall have entered into the Servicing Agreement;
(f) The related Series of Notes shall be issued and sold on the Closing
Date, the Issuer shall receive the full consideration due it upon the issuance
of the Notes, and the Issuer shall have applied such consideration, to the
extent necessary, to pay the related Purchased Asset Price; and
(g) The Seller shall have executed and delivered the Assignment.
Section 5.02. Conditions to the Sellers' Obligations. The obligations of
the Seller to execute and deliver to the Issuer the Assignment or the Subsequent
Assignment, as the case may be, and perform it obligations pursuant to, this
Agreement on the applicable Series Closing Date shall be subject to the
satisfaction of the following conditions:
(a) All representations and warranties of the Issuer contained in this
Agreement shall be true and correct with the same effect as though such
representations and warranties had been made on such date;
(b) The Issuer shall have executed and delivered the applicable Assignment;
and
(c) All company and legal proceedings and all instruments in connection
with the transactions contemplated by this Agreement shall be satisfactory in
form and substance to the Seller, and the Seller shall have received from the
Issuer copies of all documents (including, without limitation, records of
corporate proceedings) relevant to the transactions herein contemplated as the
Seller may reasonably have requested.
Trendwest's and the Seller's obligations to repurchase the Contracts
pursuant to this Agreement shall not be affected by any failure of the Issuer to
comply with the provisions of clause (a) of this Section 5.02 subsequent to the
applicable Series Closing Date.
ARTICLE 6 TERM AND TERMINATION
Section 6.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the later of (i) payment with respect to the last Purchased Asset or (ii)
termination of the Indenture.
Section 6.02. Default by the Seller or Trendwest. If the Seller or
Trendwest shall be in default under this Agreement and such default shall not
have been cured for a period of 60 days, or if the Seller or Trendwest shall
become insolvent or make an assignment for the benefit of its creditors or have
a receiver appointed for all or substantially all of its properties, or if any
proceedings commenced, or consented to, by the Seller or Trendwest are not
stayed or dismissed within 90 days after being commenced against the Seller or
Trendwest under any bankruptcy, insolvency or other law for the relief of
debtors, the Issuer shall have the right, in addition to any other rights it may
have under any applicable law, to terminate this Agreement upon 30 days' prior
written notice to the Seller or Trendwest, as applicable; provided that any
termination of this Agreement shall not release the Seller or Trendwest, as
applicable from any obligation under this Agreement.
ARTICLE 7 MISCELLANEOUS
Section 7.01. Amendments. This Agreement and the rights and obligations of
the parties hereunder may not be changed orally but only by an instrument in
writing signed by the party against which enforcement is sought. This Agreement
may be amended by the Issuer, Trendwest and the Seller only with the consent of
the Holders of 66-2/3% in principal amount of the Controlling Class of the Notes
Outstanding of each Series; provided, however, that the number of Holders of any
Series required for any such amendment may be modified as set forth in the
related Series Supplement.
Section 7.02. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York, without regard to
choice of law principles.
Section 7.03. Notices. All demands, notices and communications hereunder
shall be in writing and shall be delivered personally, mailed by registered or
certified United States mail, postage prepaid, or sent via overnight air courier
or facsimile communication and addressed, in the case of Trendwest, to 12301
N.E. 10th Place, Bellevue, Washington 98005, in the case of the Seller, to the
Seller Address, and in the case of the Issuer, to the Issuer Address. All
notices and demands shall be deemed to have been given either at the time of the
delivery thereof to any officer of the Person entitled to receive such notices
and demands at the address of such Person for notices hereunder, or on the third
day after the mailing thereof to such address, as the case may be. Any Person
may change the address for notices hereunder by giving notice of such change to
the other Person.
Section 7.04. Separability Clause. Any provisions of this Agreement which
are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.05. Assignment. Except as provided in Section 4.01(a), this
Agreement may not be assigned or delegated by either Seller without the prior
written consent of the Issuer, the Trustee and the Holders of 66-2/3% in
principal amount of the Notes of the Controlling Class of each Series
Outstanding and may not be assigned or delegated by the Issuer without the prior
written consent of the Seller, Trustee and the Holders of 66-2/3% in principal
amount of the Notes of the Controlling Class of each Series Outstanding.
Section 7.06. Further Assurances. Each of the Seller and the Issuer each
agree to do such further acts and things and to execute and deliver to the
Trustee such additional assignments, agreements, powers and instruments as are
required by the Trustee to carry into effect the purposes of this Agreement or
to better assure and confirm unto the Trustee or the Holders of the Notes their
rights, powers or remedies hereunder. If any Obligor shall be in default under
any Contract, upon reasonable request from the Servicer, the Seller will take
all reasonable steps to assist in enforcing such Contract and preserving and
maintaining title to the Purchased Assets and the rights of the Trustee and the
Holders of the Notes therein against the claims of all persons and parties to
the extent the Seller is capable of performing such requested steps and the
Servicer reasonably determines that the assistance of the Seller is necessary to
effect the intent and purposes hereof.
Section 7.07. No Waivers; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of the Issuer or the Seller, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise of any right, remedy, or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
Section 7.08. Binding Effect; Third Party Beneficiaries. This Agreement
will inure to the benefit of and be binding upon the parties hereto, the Holders
of Outstanding Notes, and their respective successors and permitted assigns.
Section 7.09. Set-Off. (a) Trendwest and the Seller hereby irrevocably and
unconditionally waive all right of set-off that it may have under contract
(including this Agreement), applicable law or otherwise with respect to any
funds or monies of the Issuer at any time held by or in the possession of the
Seller.
(b) The Issuer shall have the right to set-off against Trendwest and the
Seller any amounts to which the Seller may be entitled and to apply such amounts
to any claims the Issuer may have against the Seller from time to time under
this Agreement. Upon any such set-off the Issuer shall give notice of the amount
thereof and the reasons therefor.
Section 7.10. Counterparts. This Agreement may be executed in one or more
counterparts all of which together shall constitute one original document.
<PAGE>
IN WITNESS WHEREOF, the Seller, Trendwest, and the Issuer have caused this
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date and year first above written.
TRENDWEST FUNDING II, INC., Seller
By
Name:
Title:
TRENDWEST RESORTS, INC.
By
Name:
Title:
TRI FUNDING II, INC., Issuer
By
Name:
Title:
<PAGE>
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ANNEX A
FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
Pursuant to Section 3.04(b) and Section 3.04(e) of the Purchase and
Sale Agreement dated as of March 1, 1998 (the "Sale Agreement"), between
Trendwest Funding II, Inc. (the "Seller"), Trendwest Resorts, Inc., and TRI
Funding II, Inc. (the "Issuer"), attached as Schedule I hereto is a Supplemental
Schedule, which includes information regarding Receivables that are hereby sold,
assigned, transferred and delivered by the Seller to the Issuer in accordance
with the Sale Agreement and the [Subsequent] Assignment and setting forth the
Collateral Value of any Contract being sold to the Seller by the Issuer pursuant
to an Upgrade or exchanged pursuant to a substitution.
TRENDWEST FUNDING II, INC., Seller
By
Name:
Title:
TRI FUNDING II, INC., Issuer
By
Name:
Title:
<PAGE>
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SCHEDULE I
SUPPLEMENTAL SCHEDULE FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
<PAGE>
===============================================================================
===============================================================================
EXHIBIT A
FORM OF CONTRACT
<PAGE>
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===============================================================================
EXHIBIT B
FORM OF ASSIGNMENT
This Assignment Agreement ("Assignment") is made as of March ___, 1998
(the "Transfer Date"), by and between Trendwest Funding II, Inc., a Delaware
corporation, (the "Assignor") and TRI Funding Company II, Inc., a Delaware
Corporation (the "Assignee"), with reference to the following facts:
RECITALS:
A. In connection with the sale of certain assets by the Assignor in
conjunction with the issuance of notes on the date hereof by the Assignee,
Assignee and the Assignor have executed the Purchase and Sale Agreement dated as
of March 1, 1998 (the "Sale Agreement").
B. In connection with the Sale Agreement, the Assignor desires to assign
and transfer to Assignee all of such Assignor's right, title and interest in and
to each of the purchased assets described in Schedule I hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignee desires to accept this Assignment and transfer of the Assigned
Interests.
D. Terms used but not defined herein have the meanings ascribed to them in
the Sale Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and transfers,
without recourse except as provided in the Sale Agreement, to Assignee (and the
successors and assigns of Assignee) the following property:
1.1. Such Assignor's right, title and interest in and to the Receivables
related to the Contracts described and listed on Schedule I hereto.
1.2. A security interest in the vacation credits subject to such Contracts
(the "Credits").
1.3. A security interest in all other Purchased Assets relating to such
Contracts.
2. Pledge. The Assignor hereby pledges, without recourse except as provided
in the Sale Agreement, to Assignee (and the successors and assigns of Assignee)
a security interest in the Contracts.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that for
all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor.
5. Governing Law. This Assignment shall be governed by and interpreted in
accordance with the laws of the State of New York, and the parties hereto hereby
acknowledge and agree that this Assignment and the transactions contemplated
hereunder were negotiated and entered into in the State of New York.
6. Authority. The Assignor and Assignee each hereby represent respectively
that they have full power and authority to enter into this Assignment.
7. Counterparts. This Assignment may be executed in multiple counterparts,
each of which shall be deemed an original but all of which, taken together,
shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that this
Assignment will be binding and will inure to the benefit of the Assignor and its
successors and assigns and the Assignee and its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, this Assignment has been executed as of the date first
above written.
TRENDWEST FUNDING II, INC., ASSIGNOR
By
Name:
Title:
TRI FUNDING II, INC., ASSIGNEE
By
Name:
Title:
<PAGE>
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==============================================================================
EXHIBIT C
FORM OF SUBSEQUENT ASSIGNMENT
This Assignment Agreement ("Assignment") is made as of ___________, _____
(the "Transfer Date"), by and between Trendwest Funding II, Inc., a Delaware
corporation, (the "Assignor") and TRI Funding Company II, Inc., a Delaware
Corporation (the "Assignee"), with reference to the following facts:
RECITALS:
A. In connection with the sale of certain assets by the Assignor in
conjunction with the issuance of notes on the date hereof by the Assignee,
Assignee and the Assignor have executed the Purchase and Sale Agreement dated as
of March 1, 1998 (the "Sale Agreement").
B. In connection with the Sale Agreement, the Assignor desires to assign
and transfer to Assignee all of such Assignor's right, title and interest in and
to each of the purchased assets described in Schedule I hereto, as supplemented
from time to time, and the corresponding paragraphs below (the "Assigned
Interests").
C. Assignee desires to accept this Assignment and transfer of the Assigned
Interests.
D. Terms used but not defined herein have the meanings ascribed to them in
the Sale Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignor and Assignee hereby agree as follows:
1. Assignment. The Assignor hereby assigns, conveys, grants and transfers,
without recourse except as provided in the Sale Agreement, to Assignee (and the
successors and assigns of Assignee) the following property:
1.1. Such Assignor's right, title and interest in and to the Receivables
related to the Contracts described and listed on Schedule I hereto.
1.2. A security interest in the vacation credits subject to such Contracts
(the "Credits").
1.3. A security interest in all other Purchased Assets relating to such
Contracts.
2. Pledge. The Assignor hereby pledges, without recourse except as provided
in the Sale Agreement, to Assignee (and the successors and assigns of Assignee)
a security interest in the Contracts.
3. Further Assurance. The Assignor and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignor and Assignee hereby acknowledge that for
all purposes the Assignor and Assignee are each separate and distinct legal
entities. Accordingly, the Assignor shall not be liable to any third party for
the debts, obligations and liabilities of the Assignee; and Assignee shall not
be liable to any third party for the debts, obligations and liabilities of the
Assignor.
5. Governing Law. This Assignment shall be governed by and interpreted in
accordance with the laws of the State of New York, and the parties hereto hereby
acknowledge and agree that this Assignment and the transactions contemplated
hereunder were negotiated and entered into in the State of New York.
6. Authority. The Assignor and Assignee each hereby represent respectively
that they have full power and authority to enter into this Assignment.
7. Counterparts. This Assignment may be executed in multiple counterparts,
each of which shall be deemed an original but all of which, taken together,
shall constitute one and the same instrument.
8. Successors and Assigns. The Assignor and Assignee each agree that this
Assignment will be binding and will inure to the benefit of the Assignor and its
successors and assigns and the Assignee and its successors and assigns.
<PAGE>
IN WITNESS WHEREOF, this Assignment has been executed as of the date first
above written.
TRENDWEST FUNDING II, INC., ASSIGNOR
By
Name:
Title:
TRI FUNDING II, INC., ASSIGNEE
By
Name:
Title:
<PAGE>
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EXHIBIT D
FORM OF SUBORDINATED NOTE
$------------
TRI FUNDING II, INC.
SUBORDINATED NOTE
Date: ____________, _____ Stated Maturity: __________, 2___
TRI FUNDING II, INC., a special purpose corporation duly organized and
existing under the laws of the State of Delaware (the "Issuer," which term
includes any successor entity under the Indenture referred to below), for value
received, hereby promises to pay to Trendwest Funding II, Inc. ("TFI"), or its
assigns, the principal sum ___________________ Dollars ($_____________) in
monthly installments beginning on ___________, ______ (the "Initial Payment
Date"), and to pay interest monthly in arrears on the unpaid portion of said
principal sum (and, to the extent that the payment of such interest shall be
legally enforceable, on any overdue installment of interest on this Subordinated
Note) on the fifteenth day of each calendar month or, if such fifteenth day is
not a Business Day, the Business Day immediately following (each, a "Payment
Date"), for the period from and including ___________, _____ through the last
day of the applicable Due Period immediately preceding the Initial Payment Date
for the Series _____ Notes referred to below, and thereafter, monthly from and
including the first day through the last day of the Due Period immediately
preceding the Payment Date, at the rate of _______% per annum (calculated on the
basis of a 360-day year consisting of 12 months of 30 days each). Each monthly
installment of principal payable on this Subordinated Note shall be an amount
equal to the cash available for distribution pursuant to a Series Supplement
relating to such Series until the principal amount owed hereunder, as adjusted
as set forth below, is paid in full. Any remaining unpaid portion of the
principal amount of this Subordinated Note shall be due and payable no later
than the Stated Maturity referred to above; provided, however, that if the
Series _____ Notes (as defined below) are not paid in full on such date, no such
amounts shall be due or payable until the Series _____ Notes are paid in full.
All terms used in this Subordinated Note which are defined in the Indenture
(referred to herein as the "Indenture"), dated as of March 1, 1998, among the
Issuer, Trendwest Resorts, Inc., as Servicer, and LaSalle National Bank, as
Trustee shall have the meanings assigned to them in the Indenture.
The principal and interest on this Subordinated Note are payable by
check mailed by first-class mail to TFI or its assigns or by wire transfer in
immediately available funds to the account specified in writing to the Trustee
by TFI or its assigns received at least five Business Days prior to the Record
Date for the Payment Date on which wire transfers will commence, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. Funds represented by checks
returned undelivered will be held for payment to the Person entitled thereto,
subject to the terms of the Indenture, at the office or agency in the United
States of America designated as such by the Issuer for such purpose pursuant to
the Indenture.
The principal owed on this Subordinated Note will be increased from
time to time in the event that TFI transfers the receivable related to an
Upgrade Contract to the Issuer to be included in the Series _____ Trust Estate,
such amount to equal the difference between the principal balance of the
receivable of Upgrade Contract as of the date of such Upgrade and the Collateral
Value on such date of the Receivable being replaced.
This Subordinated Note and the Issuer's Receivables-Backed Notes Series
_____ (the "Series _____ Notes") issued pursuant to the Indenture are secured by
certain Receivables and other Collateral described in the Indenture and the
Series Supplement. The Series Trust Estate relating to the Series _____ Notes
also secures the payment of certain other amounts and certain other obligations
as described in the Indenture and the Series Supplement. Until the Notes are
paid in full and the obligations of the Issuer under the Indenture and the
Series Supplement are satisfied, (i) the Subordinated Notes are payable only at
the time and in the manner provided in the Indenture and the Series Supplement
and are not redeemable or prepayable at the option of the Issuer before such
time and (ii) the holder of this Subordinated Note will not cause the filing of
a bankruptcy petition against the Issuer for any reason whatsoever, including,
without limitation, the failure of the Issuer to make any payments of principal
of or interest on this Subordinated Note until after a period equal to 10 days
plus the applicable preference period under the United States Bankruptcy Code
has passed since the Series _____ Notes were paid in full.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the holder of this Subordinated Note under the
Indenture and the Series Supplement at any time by the Issuer, the Trustee and
the Servicer with the consent of the Holders of not less than 66-2/3% in
principal amount of Notes of the Controlling Class of the Series _____ Notes
Outstanding under the Indenture and the Series Supplement. The Indenture also
contains provisions permitting the Holders of specified percentages in aggregate
principal amount of the Series _____ Notes, at the time Outstanding under the
Indenture and the Series Supplement, to waive compliance by the Issuer with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. This Subordinated Note shall not be amended
without the consent of Holders of not less than 66-2/3% in principal amount of
the Controlling Class of the Series _____ Notes Outstanding.
No reference herein to the Indenture or the Series Supplement and no
provision of this Subordinated Note or of the Indenture or the Series Supplement
shall alter or impair the obligation of the Issuer, which is absolute and
unconditional, to pay the principal of and interest on this Subordinated Note,
but, so long as any Notes of any Series are Outstanding, solely from the Series
Collateral pledged to the Trustee under the Indenture and the Series Supplement
with respect to the Series _____ Notes at the times, place and rate, and in the
coin or currency, herein prescribed. Notwithstanding anything else to the
contrary contained in this Subordinated Note or the Indenture, the obligation of
the Issuer to pay the principal of and interest on this Subordinated Note is not
a general obligation of the Issuer, nor its officers or directors, but, so long
as any Notes are Outstanding, is limited solely to the Collateral pledged under
the Indenture.
So long as the Notes of any Series are Outstanding, TFI shall not
transfer this Subordinated Note to any Person.
This Subordinated Note and the Indenture shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to conflicts of laws principles.
IN WITNESS WHEREOF, TRI Funding II, Inc. has caused this Subordinated Note
to be signed, manually, by its ______________________.
TRI FUNDING II,INC.
By
Name:
Title:
<PAGE>
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SCHEDULE I
CONTRACT SCHEDULE
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RECEIVABLES PURCHASE AGREEMENT
among
TRI FUNDING COMPANY I, L.L.C.
("Prior Issuer")
and
TRENDWEST RESORTS, INC.
("Trendwest")
and
TW HOLDINGS, INC.
("TWH")
and
TRENDWEST FUNDING II, INC.
("TFI")
Dated as of March 1, 1998
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<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE 1 DEFINITIONS...................................................2
Section 1.01. Defined Terms..........................................2
ARTICLE 2 ACQUISITION OF ASSETS.........................................3
Section 2.01. [Reserved.]....................................................3
Section 2.02. Initial Acquisition............................................3
Section 2.03 Subsequent Acquisitions........................................4
Section 2.04 Delivery of Contracts..........................................4
Section 2.05. Servicing of Contracts and Related Credits.....................4
Section 2.06. Review of Contracts............................................4
ARTICLE 3 REPRESENTATIONS AND WARRANTEES................................5
Section 3.01. Representations and Warranties of the Sellers..................5
Section 3.02. Representations and Warranties of TFI.........................12
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties................................14
Section 3.04. Requirements for Purchase or Substitution of Contracts........14
ARTICLE 4 SELLER COVENANTS..............................................16
Section 4.01. Seller Covenants..............................................16
Section 4.02. TFI Covenants.................................................20
Section 4.03. Assignment of Assets..........................................20
ARTICLE 5 CONDITIONS PRECEDENT..........................................21
Section 5.01. Conditions to TFI's Initial Obligations.......................21
Section 5.02. Conditions to the Sellers' Obligations........................22
ARTICLE 6 TERM AND TERMINATION..........................................22
.
Section 6.01. Term..........................................................22
Section 6.02. Default by Sellers............................................22
ARTICLE 7 MISCELLANEOUS.................................................23
Section 7.01. Amendments....................................................23
Section 7.02. Governing Law.................................................23
Section 7.03. Notices.......................................................23
Section 7.04. Separability Clause...........................................23
Section 7.05. Assignment....................................................23
Section 7.06. Further Assurances............................................24
Section 7.07. No Waivers; Cumulative Remedies...............................24
Section 7.08. Binding Effect; Third Party Beneficiaries.....................24
Section 7.09. Set-Off.......................................................24
Section 7.10. Counterparts..................................................24
Signature Page..............................................................25
ANNEX A -- FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS AND UPGRADE CONTRACTS
EXHIBIT A -- FORM OF CONTRACT
EXHIBIT B -- FORM OF ASSET ASSIGNMENT
EXHIBIT C -- FORM OF SUBSEQUENT ASSET ASSIGNMENT
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THIS RECEIVABLES PURCHASE AGREEMENT, dated as of March 1, 1998 (this
"Agreement"), by and among TRI Funding Company I, L.L.C., a Delaware limited
liability company (herein, together with its permitted successors and assigns,
the "Prior Issuer"), Trendwest Resorts, Inc., an Oregon corporation (herein,
together with its permitted successors and assigns, "Trendwest"), TW Holdings,
Inc., a Nevada corporation (herein, together with its permitted successors and
assigns, "TWH"), and Trendwest Funding II, Inc., a Delaware corporation (herein,
together with its permitted successors and assigns, "TFI").
PRELIMINARY STATEMENT
TRI Funding II, Inc., a Delaware special purpose corporation (the
"Issuer") has entered into an Indenture, dated as of March 1, 1998 (as amended
and supplemented from time to time, the "Indenture"), with LaSalle National
Bank, as trustee (herein, together with its permitted successors and assigns,
the "Trustee"), and Trendwest, as servicer (herein, together with its permitted
successors and assigns, the "Servicer"), pursuant to which the Issuer intends to
issue its notes, issuable in one or more Series as provided in the Indenture
(the "Notes"), limited as to principal amount as set forth in the related Series
Supplement.
In furtherance thereof, the Prior Issuer, Trendwest, TWH (collectively,
the "Sellers") and TFI have entered into this Agreement to provide for, among
other things, the acquisition by TFI of all of the right, title and interest in
and to certain Assets which will be sold (or, with respect to the Contracts,
pledged) by TFI to the Issuer pursuant to that certain Purchase and Sale
Agreement, dated as of even date herewith, by and among TFI, Trendwest and the
Issuer (the "Sale Agreement"). The Issuer will be pledging and granting to the
Trustee a security interest in the Issuer's interest in the Assets, as security
for the Notes. As a precondition to the effectiveness of this Agreement, the
Issuer, the Trustee, the Subservicer and the Servicer will enter into the
Servicing Agreement, dated as of March 1, 1998 (as amended and supplemented from
time to time, the "Servicing Agreement"), to provide for the administration and
servicing of the Assets. In connection with the issuance of each Series of Notes
and pursuant to this Agreement, the Sellers from time to time will sell the
Assets to TFI. Such sales shall be effected on the Closing Date by this
Agreement and an Asset Assignment among the Sellers and TFI, and on each
subsequent Series Closing Date by this Agreement and the applicable Subsequent
Asset Assignment among Trendwest, TWH (collectively, the "Subsequent Sellers")
and TFI, and the list of Contracts so conveyed shall be listed on Schedule I to
such Asset Assignment or the applicable Subsequent Asset Assignment.
In order to further secure the Notes, TFI is granting to the Issuer,
pursuant to the Sale Agreement, and the Issuer subsequently will grant to the
Trustee pursuant to the Indenture, a security interest in, among other things,
TFI's rights derived under this Agreement, and the Sellers agree that all
representations, warranties, covenants and agreements made by them in this
Agreement with respect to the Assets shall also be for the benefit and security
of the Issuer and the Trustee and all holders from time to time of the
applicable Series of Notes. In consideration for the Assets and their
representations, warranties, covenants and other agreements under this
Agreement, on the Closing Date TWH and the Prior Issuer will receive cash, and
Trendwest will receive cash, inter-company debt, and all of the common stock of
TFI, and on each subsequent Series on each subsequent Series Closing Date, TWH
will receive cash and Trendwest will receive cash and inter-company debt.
ARTICLE 1DEFINITIONS
Section 1.01. Defined Terms. For purposes of this Agreement the
following terms shall have the meanings specified herein. Capitalized terms used
herein but not otherwise defined shall have the respective meanings assigned to
such terms in the Indenture or the Sale Agreement.
"Acquisition Consideration" shall mean, with respect to any Contracts
and the related Receivables, the cash which shall be paid by TFI to the Sellers
on the applicable Series Closing Date and an interest in payments to TFI from
the Issuer in an aggregate amount equal to 100% of the aggregate principal
amount outstanding on the Contracts as of the related Series Cut-Off Date.
"Asset Assignment" shall mean the Asset Assignment, substantially in
the form attached hereto as Exhibit B, which shall be entered into in connection
with the conveyance of Assets from the Sellers to TFI on the Closing Date.
"Assets" shall mean all of the Sellers' right, title and interest in
and to (a) the Contracts and the related Receivables, including the proceeds of
the Contracts and the related Receivables and all payments received on or with
respect to the Contracts and the related Receivables and due after the related
Series Cut-Off Date, (b) the Contract Files and the Custodian Files, (c) the
Sellers' rights and interests in the related Credits, (d) the Servicing Charges
with respect to the Contracts and (e) all income and proceeds of the foregoing
or relating thereto.
"Contract File" shall mean, with respect to each Contract, the
following documents:
(i) a copy of the Contract;
(ii) notice of assignment; and
(iii) any other documents or papers relating to servicing the Receivables.
"Custodian" shall mean Sage Systems, Inc. and its permitted successors and
assigns.
"Custodian File" shall mean, with respect to each Contract, the
following documents:
(i) the original Contract; and
(ii) notice of assignment.
"Electronic Ledgers" shall mean the electronic master records of all
contracts of the Sellers or the Issuer similar to and including the Contracts.
"Eligible Contract" shall mean a Contract that satisfies the selection
criteria set forth in Section 3.01(a) hereof and which is aged at least four
months, provided that with respect to any Substitute Contract, any reference in
such Section to Series Cut-Off Date shall be deemed to refer to the date as of
which such Substitute Contract is conveyed to the Seller in accordance with
Section 3.04 hereof.
"Indenture" shall mean the Indenture, dated as of March 1, 1998, by and
among the Issuer, the Trustee and the Servicer, as amended and supplemented from
time to time.
"Seller Address" with respect to Trendwest shall mean 12301 N.E. 10th
Place, Bellevue, Washington 98005, with respect to TWH shall mean 245 E. Liberty
Street, 3rd Floor, Reno, Nevada 89520 and with respect to the Prior Issuer shall
mean 3250 Lakeport Boulevard, Klamath Falls, Oregon 97601.
"Series Cut-Off Date" shall have the meaning set forth in the Indenture.
"Subsequent Asset Assignment" shall mean the Subsequent Asset
Assignment, substantially in the form attached hereto as Exhibit C, which shall
be entered to in connection with the conveyance of Assets from the Subsequent
Sellers to TFI on each subsequent Series Closing Date.
"Substitute Contract" shall have the meaning set forth in Section 3.04(b)
hereof.
"Substitute Receivable" shall mean the Receivable related to a Substitute
Contract.
"Substitution Criterion" shall have the meaning set forth in Section
3.04(b) hereof.
"TFI Address" shall mean 3250 Lakeport Boulevard, Klamath Falls, Oregon
97601.
"Upgrade" shall have the meaning set forth in the Indenture.
"Upgrade Contract" shall have the meaning set forth in the Indenture.
ARTICLE 2ACQUISITION OF ASSETS
Section 2.01. [Reserved.]
Section 2.02. Initial Acquisition. In return for the Asset
Consideration and other rights created by this Agreement, each of the Sellers
hereby transfers, assigns, sells and grants to TFI, without recourse except as
provided in Section 3.03 of this Agreement, on the Closing Date, any and all of
such Seller's respective right, title and interest in and to all of the Assets
relating to the Contracts set forth on Schedule I to the Asset Assignment. Each
of the Sellers hereby acknowledges that its transfer of the Assets to TFI is
absolute and irrevocable, without reservation or retention of any interest
whatsoever by such Seller.
Section 2.03. Subsequent Acquisitions. TWH and Trendwest, in return
for cash and for cash and inter-company debt, respectively, shall transfer,
assign, sell and grant to TFI, without recourse except as provided in Section
3.03 of this Agreement, on each Series Closing Date, any and all of their
respective right, title and interest in and to all of the Assets relating to the
Contracts set forth on Schedule I to the respective Subsequent Asset
Assignments. Each of TWH and Trendwest acknowledges that its transfer of the
Assets to TFI will be absolute and irrevocable, without reservation or retention
of any interest whatsoever by it.
Section 2.04. Delivery of Contracts; Filing of Financing Statements.
(a) In connection with TFI's acquisition of the Assets, Trendwest, on behalf of
the Sellers, TFI and the Issuer, shall deliver, or cause the delivery of, the
original Contracts to the Custodian so that the Custodian may retain possession
thereof as provided in the Transaction Documents. In addition, the Sellers agree
to execute, and Trendwest agrees to record and file prior to each Series Closing
Date at its own expense, financing statements (and thereafter timely
continuation statements with respect to such financing statements) with respect
to the Assets transferred on such date, in accordance with Section 3.01(a)(viii)
and Section 4.01(c) hereof.
(b) In connection with such acquisition, each of the Sellers shall
promptly, at its own expense, cause any Electronic Ledger maintained by it to be
marked to show which Assets have been acquired by TFI in accordance with this
Agreement and transferred or pledged, as the case may be, by TFI to the Issuer
and pledged by the Issuer to the Trustee in accordance with the Transaction
Documents.
(c) It is the intention of the Sellers and TFI that TFI is acquiring
full and absolute title to the Assets. If it is determined, however, that the
Sellers have transferred to TFI a security interest in the Assets, then this
Agreement shall constitute a security agreement under applicable law, and each
of the Sellers does hereby pledge, grant and assign to TFI a security interest
in the Assets.
Section 2.05. Servicing of Contracts and Related Credits. The
Servicer shall service the Contracts and the other Assets for the benefit of the
Issuer (and its successors and assigns) in accordance with the terms and
conditions of the Transaction Documents. Notwithstanding the foregoing,
Trendwest acknowledges and agrees that its obligations under this Agreement are
independent of any obligations it may have as Servicer and that its obligations
under this Agreement will continue in full force and effect, whether or not it
is acting as Servicer, until termination of this Agreement in accordance with
Section 6.01 hereof, unless otherwise provided herein.
Section 2.06. Review of Contracts. If any of the Sellers or the
Custodian (who shall thereupon notify TFI, Trendwest and the Trustee) discovers
that any Contracts are missing or defective (that is, mutilated, damaged,
defaced, incomplete, improperly dated, forged or otherwise physically altered)
in any material respect, Trendwest shall correct or cure such omission, defect
or other irregularity within 30 days from the date Trendwest discovered such
omission or defect, or from the date Trendwest is notified by the Custodian of
such omission or defect. In the event Trendwest is unable to correct or cure
such omission, defect or irregularity within the 30-day period described in the
preceding sentence, Trendwest shall purchase or replace such Contract from TFI
in accordance with Section 3.03 hereof.
ARTICLE 3 REPRESENTATIONS AND WARRANTEES
Section 3.01. Representations and Warranties of the Sellers. Each of
Trendwest, with respect to all of the Contracts and related Receivables, the
Prior Issuer, with respect to the Contracts and related Receivables transferred
by the Prior Issuer, and TWH, with respect to the Contracts and related
Receivables transferred by TWH, hereby and by the Asset Assignment, hereby makes
the following representations and warranties to TFI and for the benefit of the
Issuer, the Trustee and Holders of each Series of Notes, on which TFI relies in
acquiring the Assets and on which the Holders rely in purchasing such Notes;
provided, however, that with respect to the representations and warranties
relating to the Assets, the Holders of Notes of any Series only rely on such
representations and warranties to the extent such Assets are part of the related
Series Trust Estate. Such representations and warranties shall survive any
subsequent transfer, assignment, contribution or conveyance of the Contracts and
related Receivables and interest in the related Credits and any issuance of
Notes.
(a) As to each Contract, as of the related Series Closing Date:
(i) The information set forth in the related Series Contract Schedule is
true and correct as of the related Series Cut-Off Date.
(ii) The rights with respect to the Contract are assignable by the lender
thereunder and its successors and assigns without the consent of any Person.
(iii) The applicable Seller has heretofore provided to the Custodian the
sole original counterpart of the Contract, together with any and all amendments,
waivers and modifications thereto, except for any original executed counterparts
which have been marked to show that they have been pledged by the Issuer to the
Trustee under the Indenture, and the terms of such Contract have not been
further amended, waived or modified subsequent to the above being provided to
the Custodian.
(iv) The Electronic Ledgers have been marked as provided in Section 2.04(b)
hereof.
(v) The Contract was not originated in, nor is it subject to the laws of,
any jurisdiction, the laws of which would make unlawful the sale, transfer or
assignment of such document under any of the Transaction Documents, including
any repurchase in accordance with the Transaction Documents.
(vi) The Contract is, and on the related Series Closing Date will be, in
full force and effect in accordance with its respective terms, and none of the
Sellers or any Obligor has or will have suspended or reduced any payments or
obligations due or to become due thereunder by reason of a default by the other
party to such Contract; as of the related Series Cut-Off Date, no Scheduled
Payment with respect to such Contract has not been received and remains unpaid
for a period of 30 or more days (without regard to advances, if any, made by the
Servicer), and there are no proceedings pending, or to the best of the knowledge
of any Seller, threatened asserting insolvency of such Obligor; there has been
no other default, breach or violation and no event other than relating to an
Upgrade, permitting acceleration under such Contract; there are no proceedings
pending, or to the best of the knowledge of any Seller, threatened, wherein such
Obligor or any governmental agency has alleged that such Contract is illegal or
unenforceable; and none of the related Scheduled Payments are subject to any
set-off or credit of any kind.
(vii) The Contract is the valid, binding and legally enforceable obligation
of the parties thereto, enforceable in accordance with its terms, subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of whether enforcement
is sought in a court of law or equity.
(viii) All actions, filings (including UCC filings) and recordings as are
required by the Indenture and that may be necessary to perfect, with respect to
the applicable Series Trust Estate, a first priority security interest of the
Issuer and the Trustee in, and the sale by the applicable Seller to TFI of, the
Contract and the related Receivables and the sale from TFI to the Issuer of the
related Receivables, being acquired and the transfer of the security interest in
the related Credits hereunder have been accomplished and are in full force and
effect.
(ix) The Contract is identical to one of the form contracts attached as
Exhibit A hereto, except for either (i) such immaterial modifications or
deviations from the form contract which appear in such Contract, which
immaterial modifications or deviations will not have a material adverse effect
on the Holders of the Notes or (ii) such modifications or deviations as set
forth on Schedule I to the Asset Assignment or Subsequent Asset Assignment, as
the case may be, related to such Contract.
(x) The Contract was originated by Trendwest in Trendwest's ordinary course
of business and meets Trendwest's qualifications for originating vacation credit
installment contracts. The origination and collection practices used by
Trendwest and the applicable Seller with respect to such Contract have been in
all respects legal, proper, prudent and customary in the vacation credit
financing and servicing business.
(xi) The Receivable is under a Contract that has a term to the last
Scheduled Payment Date of not more than 84 months (except for Contracts relating
to the Eagle Crest resort, which have a term to the last Scheduled Payment Date
of not more than 120 months) and not less than one month.
(xii) The Contract obligates the related Obligor to make all Scheduled
Payments thereunder in full notwithstanding the collection by Trendwest of a
security deposit with respect thereto. The calculation of the Collateral Value
of the related Receivable does not include any security deposits or similar
payments collected by or on behalf of Trendwest which are applied to Scheduled
Payments.
(xiii) All requirements of applicable federal, State and local laws, and
regulations thereunder, including, without limitation, usury laws, if any, in
respect of the Contract have been complied with in all material respects, and
such Contract complied in all material respects at the time it was originated or
made and now complies in all material respects with all legal requirements of
the jurisdiction in which it was originated.
(xiv) The Contract is not and will not be subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
whether arising out of transactions concerning such Contract or otherwise, and
the operation of any of the terms of such Contract or the exercise by the
applicable Seller or the Obligor of any right under such Contract will not
render such Contract unenforceable in whole or in part, and no such right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto, except that certain rights or defenses may exist under applicable law
which, individually or in the aggregate, do not make the remedies available to
the Seller with respect to such Contract inadequate for the practical
realization of the benefits provided thereby.
(xv) Each of the Sellers has duly fulfilled all obligations on the lender's
part to be fulfilled under or in connection with the Contract, including,
without limitation, giving any notices or consents necessary to effect the
acquisition of the Assets by TFI and has done nothing to impair the rights of
TFI in such Contract or payments with respect thereto.
(xvi) The Contract and the related Seller's interest in the related Credits
have not been sold, transferred, assigned or pledged by the Seller to any Person
other than the Issuer (except for such interests in the Purchased Assets which
shall be terminated on or prior to the related Series Closing Date), and upon
execution and delivery hereof and of the Asset Assignment by the related Seller
and the payment by the Issuer of the related Acquisition Consideration, TFI will
have all of the right, title and interest in and to such Seller's interest in
the Contract and the related Receivable and a security interest in the related
Credits, free and clear of all liens and encumbrances, except for the interests
of the Obligor pursuant to such Contract. Such Contract has not been satisfied,
subordinated or rescinded.
(xvii) The relevant Seller has no specific knowledge that the Contract will
not be fully performed in accordance with its terms.
(xviii) The Obligor has made the first payment (which payment may be an
advance payment under such Contract) due under the Contract within the time set
forth in such Contract.
(xix) The related Obligor is located in the United States of America or
Canada, and the related Scheduled Payments are payable in U.S. dollars.
(xx) Except for changes due to Upgrades, the related Scheduled Payments
were established at the time such Contract was originated.
(xxi) There are no unpaid brokerage or other fees owed to third parties
relating to the origination of the Contract.
(xxii) The Contract cannot be rescinded pursuant to applicable consumer
finance laws.
(xxiii) The contract was originated in compliance with the requirements of
all federal, state and local laws, rules and regulations applicable to the
origination of the Contract (including, without limitation, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Billing
Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil Relief
Act of 1940, and any other federal, state and local laws relating to interest,
usury, consumer credit, equal credit opportunity, fair credit reporting,
privacy, consumer protection, false or deceptive trade practices and disclosure,
the Mail Fraud statute and any timeshare disclosure), non-compliance with which
could have a material adverse effect on the enforceability or value of the
Contract.
(xxiv) All Scheduled Payments are due and payable on a monthly basis and
such Scheduled Payments are level payments throughout the terms of the
Contracts.
(b) As to the aggregate pool of Contracts supporting a Series of Notes as
of the related Series Closing Date, no Seller used any selection procedures that
identified the Contracts as being less desirable or valuable than other
comparable vacation credit installment contracts owned by such Seller.
(c) As to each Seller as of the Closing Date and as to each Subsequent
Seller as of each subsequent Series Closing Date:
(i) Such Seller has been duly organized and is validly existing and in good
standing as a corporation or limited liability company, as applicable, under the
laws of the State in which such Seller was organized with corporate power and
authority to own its properties and to transact the business in which it is now
engaged, and such Seller is duly qualified to do business in and is in good
standing under the laws of each State in which its business is located or is not
required under applicable law to effect such qualification, except where failure
to so qualify would not have a material adverse effect on the ability of such
Seller to perform its obligations under the Transaction Documents or on any of
the Contracts, the Receivables or the related Credits or on the ability of such
Seller, TFI, the Issuer or the Trustee to realize upon or enforce the same.
(ii) The performance of the obligations of such Seller under this Agreement
and the other Transaction Documents and the consummation of the transactions
herein and therein contemplated will not conflict with or result in any breach
of any of the terms or provisions of, or constitute with or without notice,
lapse of time or both, a default under the Articles of Incorporation, Bylaws,
Certificate of Formation or Limited Liability Company Agreement, as applicable,
of such Seller, or any material indenture, agreement, mortgage, deed of trust or
other instrument to which such Seller is a party or by which it is bound, or
result in the creation or imposition of any lien, charge or encumbrance (except
the lien created by the Transaction Documents) upon any of the property or
assets of such Seller pursuant to the terms of such indenture, mortgage, deed of
trust, or other agreement or instrument to which such Seller is a party or by
which such Seller is bound or to which any of such Seller's property or assets
is subject, nor will such action result in any violation of the provisions of
such Seller's Articles of Incorporation, By-laws, Certificate of Formation or
Limited Liability Company Agreement, as applicable, or any statute or any order,
rule or regulation of any court or any regulatory authority or other
governmental agency or body having jurisdiction over such Seller or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with or other action of any court, or any such regulatory
authority or other governmental agency or body is required for consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents except such consents, approvals and authorizations which have been
obtained or such registrations or qualifications which have been made.
(iii) This Agreement and any other Transaction Document to which such
Seller is a party have been duly authorized, executed and delivered by such
Seller by all necessary corporate action and such agreements are the valid and
legally binding obligations of such Seller, enforceable against such Seller in
accordance with their respective terms, subject as to enforcement to applicable
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of law or equity.
(iv) The relevant Seller Address is the chief executive office, principal
place of business and the office where such Seller keeps its records concerning
the Contracts, Receivables and the related Credits. Such Seller has not used any
address other than its Seller Address and 4010 Lake Washington Boulevard, Suite
300, Kirkland, Washington 98033, in the previous five-year period. Such Seller's
legal name is as set forth in this Agreement. Such Seller has not used or done
business under any other name in the previous six-year period.
(v) Such Seller does not believe, nor does it have any reasonable cause to
believe, that it cannot perform each and every covenant contained in this
Agreement.
(vi) The transactions contemplated by the Transaction Documents are being
consummated by such Seller in furtherance of its ordinary business purposes,
with no contemplation of insolvency and with no intent to hinder, delay or
defraud any of its present or future creditors.
(vii) The consideration received by such Seller pursuant to this Agreement
is fair consideration having value reasonably equivalent to or in excess of the
value of the performance of such Seller's obligations hereunder.
(viii) Neither on the date of the transactions contemplated by the
Transaction Documents or immediately before or after such transactions, nor as a
result of the transactions, will such Seller:
(A) be insolvent such that the sum of its debts is greater than all of its
respective property, at a fair valuation;
(B) be engaged in, or about to engage in, business or a transaction for
which any property remaining with such Seller will be an unreasonably small
capital or the remaining assets of such Seller will be unreasonably small in
relation to its respective business or the transaction; and
(C) have intended to incur, or believed it would incur, debts that would be
beyond its respective ability to pay as such debts mature or become due. Such
Seller's assets and cash flow enable it to meet its present obligations in the
ordinary course of business as they become due.
(ix) Both immediately before and after the transactions contemplated by the
Transaction Documents (a) the present fair salable value of such Seller's assets
was or will be in excess of the amount that will be required to pay its probable
liabilities as they then exist and as they become absolute and matured; and (b)
the sum of such Seller's assets was or will be greater than the sum of its
debts, valuing its assets at a fair salable value.
(x) The acquisition of the Assets by TFI pursuant to this Agreement is not
subject to the bulk transfer or any similar statutory provisions in effect in
any applicable jurisdiction.
(xi) There are no proceedings or investigations pending or, to the
knowledge of such Seller, threatened against or affecting such Seller in or
before any court, governmental authority or agency or arbitration board or
tribunal which, individually or in the aggregate, involve the possibility of
materially and adversely affecting the properties, business, prospects, profits
or condition (financial or otherwise) of such Seller, or the ability of such
Seller to perform its obligations under this Agreement or the other Transaction
Documents. Such Seller is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(xii) All tax returns or extensions required to be filed by such Seller in
any jurisdiction have in fact been filed, and all taxes, assessments, fees and
other governmental charges upon such Seller, or upon any of the respective
properties, income or franchises shown to be due and payable on such returns
have been, or will be, paid. All such tax returns are true and correct, and such
Seller has no knowledge of any proposed additional tax assessment against it in
any material amount nor of any basis therefor. The provisions for taxes on the
books of such Seller are in accordance with generally accepted accounting
principles.
(xiii) Such Seller (i) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is subject, (ii) has not failed to
obtain any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct of its business,
and (iii) is not in violation in any material respect of any term of any
agreement, charter instrument, bylaw or instrument to which it is a party or by
which it may be bound which violation or failure to obtain might materially
adversely affect the business or condition (financial or otherwise) of such
Seller.
(xiv) It is the intention of such Seller that the Assets are being or have
been acquired by TFI and that the beneficial interest in and title to the Assets
are not part of such Seller's estate in the event of the filing of a bankruptcy
petition by or against such Seller under any bankruptcy law.
(xv) Immediately prior to the acquisition of the Assets by TFI pursuant to
this Agreement, such Seller was the sole owner of its portion of the Assets at
such time and had good and marketable title to the Assets, free and clear of all
liens, claims and encumbrances (except for the Acquisition Consideration and
security interests in the Assets which shall be terminated on or prior to the
applicable Series Closing Date).
(xvi) The Sellers will treat the transfer of the Assets as a sale to TFI
for federal, State and local income tax reporting and accounting purposes.
(xvii) The sale of the Assets pursuant to this Agreement constitutes the
valid sale by the Sellers to TFI of all of such Seller's right, title and
interest in the Assets.
(xviii) The Sellers have valid business reasons for selling the Assets to
TFI pursuant to this Agreement rather than obtaining a loan secured by the
Assets.
(xix) The Sellers will be operated generally so as to not be substantively
consolidated with TFI for bankruptcy purposes.
(xx) No event has occurred that adversely affects the Sellers' ability to
perform the transactions contemplated by the Transaction Documents.
(xxi) Each pension plan or profit sharing plan to which each of the Sellers
is a party has been fully funded in accordance with the obligations of such
Seller as set forth in such plan.
(xxii) Neither the acquisition nor the holding of the Contracts and the
related Receivables violates any federal or State law, rule or regulation the
non-compliance with which could have a material adverse effect on the value of
the Contracts or the related Receivables.
Section 3.02. Representations and Warranties of TFI. TFI hereby
makes the following representations and warranties for the benefit of the
Issuer, the Trustee and Holders of the Notes, on which the Sellers rely in
entering into this Agreement with TFI and on which the Holders of the Notes rely
in purchasing the Notes; such representations and warranties speak as of each
Series Closing Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Assets or any part
thereof:
(a) TFI has been duly organized and is validly existing in good standing as
a corporation under the laws of the State of Delaware, with corporate power and
authority to own its properties, perform its obligations under the Transaction
Documents and to transact the business in which it is now engaged or in which it
proposes to engage; TFI is duly qualified to do business and is in good standing
in each State in which the nature of its business requires it to be so
qualified, except where failure to so qualify would not have a material adverse
effect on the ability of TFI to perform its obligations under the Transaction
Documents.
(b) The transfer to and receipt by TFI of the Sellers' interest in the
Contracts, the Receivables and the related Credits pursuant to this Agreement
and the consummation of the transactions contemplated herein and in the
Transaction Documents will not conflict with or result in breach of any of the
terms or provisions of, or constitute (with or without notice, lapse of time or
both) a default under the Certificate of Incorporation or By-laws of TFI or any
material indenture, agreement, mortgage, deed of trust or other instrument to
which TFI is a party or by which it is bound, or result in the creation or
imposition of any lien, charge or encumbrance (except for the lien created by
the Sale Agreement and the Indenture) upon any of the property or assets of TFI
pursuant to the terms of, such indenture, mortgage, deed of trust, or other
agreement or instrument to which TFI is a party or by which it is bound or to
which any of the property or assets of TFI is subject, nor will such action
result in any violation of the provisions of the Certificate of Incorporation or
By-laws of TFI or any statute or any order, rule or regulation of any court or
regulatory authority or other governmental agency or body having jurisdiction
over TFI or any of its properties; and no consent, approval, authorization,
order, registration or qualification of or with or other action of any court or
any such regulatory authority or other governmental agency or body is required
for the acquisition of the Assets hereunder.
(c) The Transaction Documents to which TFI is a party have been duly
authorized, executed and delivered by TFI by all necessary corporate action and
constitute valid and legally binding obligations of TFI enforceable against TFI
in accordance with their terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditors' rights generally and to general principles
of equity regardless of whether enforcement is sought in a court of equity or
law.
(d) There are no proceedings or investigations to which TFI is a party
pending or, to the knowledge of TFI, threatened, before any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality
(a) asserting the invalidity of this Agreement, (b) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, or (c) seeking any determination or ruling that
would materially and adversely affect the performance by TFI of its obligations
under, or the validity or enforceability of, this Agreement.
(e) All approvals, authorizations, consents, orders or other actions of any
Person or of any court, governmental agency or body or official, required in
connection with the execution and delivery of this Agreement, have been or will
be taken or obtained on or prior to the related Series Closing Date.
(f) The TFI Address is the principal place of business and chief executive
office of TFI.
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties. Upon discovery by TFI or any of the Sellers of
the breach of any representations or warranties set forth in Section 3.01 or
3.02 hereof which materially and adversely affects the value of a Contract,
Receivable, the related Credits, or the interests of the Holders of the Notes of
any Series, or a breach of any of the representations and warranties set forth
in Sections 3.01(a)(v), 3.01(a)(vi), 3.01(a)(vii), 3.01(a)(xiii), 3.01(a)(xiv),
3.01(a)(xvi), 3.01(a)(xxii) or 3.01(a)(xxiii) hereof, the party discovering such
breach shall give prompt written notice to the other parties. Trendwest shall,
within 30 days from the date it was notified of, or otherwise discovers, such
breach, cure such breach, or, (1) if the breach relates to a particular Contract
and is not cured, either (a) purchase TFI's interest in such Contract and the
related Receivable from TFI at the Purchase Price or (b) provide a Substitute
Contract or (2) if the breach relates to a representation or warranty regarding
the selection criteria of the Contracts as a whole and is not cured by
Trendwest, either (a) purchase TFI's interest in such non-conforming Contracts
and the related Receivables from TFI or (b) provide Substitute Contracts as set
forth above, so that the representations and warranties with respect to the
selection criteria are correct, as evidenced by a certificate of an officer of
Trendwest to the Trustee. The Purchase Price for a purchased Contract shall be
paid, and any Substitute Contract shall be delivered, by Trendwest to TFI in
accordance with Section 3.04(c) hereof. It is understood and agreed that the
obligation of Trendwest to cure or purchase or replace any Contract as to which
such a breach has occurred shall constitute the sole remedy respecting such
breach available to TFI, the Issuer, the Holders of Notes or the Trustee on
behalf of such Holders (except for any indemnities provided under Section
4.01(j) hereof or any obligations under the Sale Agreement or the Indenture) for
any losses, claims, damages and liabilities arising from TFI's interest in such
Contract or the inclusion of TFI's interest in such Contract in the applicable
Series Trust Estate.
Section 3.04. Requirements for Purchase or Substitution of
Contracts; Upgrades. (a) If Trendwest is required to purchase TFI's interest in
any Contract and the related Receivables under Section 3.03 hereof, if TFI or
Trendwest is required to purchase the Issuer's interest in any Contract and the
related Receivables under Section 3.03 of the Sale Agreement, or if the Issuer
is required or elects to purchase the Trustee's interest in any Contract and the
related Receivables under Section 3.10 of the Servicing Agreement, such Contract
and related Receivables shall be purchased by Trendwest at the Purchase Price.
All purchases shall be accomplished at the times specified in subsection (c)
below.
(b) If Trendwest is required to substitute any Contract under Section
3.03 hereof or if TFI or Trendwest is required to substitute any Contract under
Section 3.03 of the Sale Agreement (a "Substitute Contract"), each such
Substitute Contract shall (i) be an Eligible Contract; (ii) be written on one of
the standard forms attached as Exhibit A to this Agreement; (iii) be accompanied
by a supplement to this Agreement substantially in the form of Annex A hereto
subjecting such Contract to the provisions hereof and providing with respect to
such Substitute Contract the information required in the related Series Contract
Schedule; (iv) not have been selected using procedures that identified the
Contracts as being less desirable or valuable than other comparable vacation
credit installment contracts owned by Trendwest; and (v) not have any Scheduled
Payments that are due after the Stated Maturity Date of the Notes of the Series
supported by such Contract. In addition, (i) such Substitute Contracts shall
have an aggregate Collateral Value at least equal to and not substantially
greater than the aggregate Collateral Value of the Contracts being withdrawn as
of the date of withdrawal (the "Substitution Criterion") and (ii) the
representations and warranties set forth in Sections 3.01 and 3.02 shall be true
and correct with respect to such Substitute Contract and the aggregate pool of
Contracts as of the date such Substitute Contract is conveyed to TFI.
Upon the substitution of any Substitute Contract pursuant to the
provisions of this Section 3.04(b), Trendwest hereby agrees that such Substitute
Contract will be subject to all the terms and provisions of this Agreement, the
Sale Agreement, the Servicing Agreement, the Custodian Agreement and the
Indenture just as if such Substitute Contract had been one of the original
Contracts acquired on the applicable Series Closing Date. Upon the substitution
of a Substitute Contract pursuant to this Section 3.04(b), TFI and Trendwest
shall also comply with the provisions and limitations set forth in the
Indenture. All substitutions shall be accomplished at the time specified in
subsection (c) below.
(c) Any purchase or substitution of a Contract by Trendwest in
accordance with Section 3.03 hereof or this Section 3.04 or by TFI or Trendwest
under Section 3.03 or Section 3.04 of the Sale Agreement shall be made either by
remittance of the Purchase Price to the Subservicer for deposit into the
Clearing Account in accordance with Section 3.03(a) of the Servicing Agreement
or by substitution of a Substitute Contract, as applicable, within one Business
Day following the expiration of the cure period set forth in Section 3.03
hereof.
(d) If an Obligor desires to enter into an Upgrade Contract,
Trendwest, as Servicer, shall inform the Issuer and TFI of such fact. In such
event, if the Issuer desires to purchase the receivable related to such Upgrade
and so advises Trendwest, Trendwest for the benefit of the Issuer and TFI may
(but shall not be obligated to) enter into an Upgrade Contract with such Obligor
and transfer such Upgrade Contract to TFI in exchange for the existing Contract
with such Obligor and an amount equal to the difference in the principal balance
between the existing Contract and the Upgrade Contract (which amount shall be
paid to Trendwest by increasing the amount owed by TFI under the intercompany
debt between TFI and Trendwest); provided, however, that (i) such Upgrade
Contract has an interest rate that is not more than 1.0% per annum lower than
the interest rate on the Contract that is being replaced, (ii) each Scheduled
Payment under the Upgrade Contract shall be the equal to or greater than the
Scheduled Payments on the existing Contract, (iii) such Obligor has made all
Scheduled Payments due on or before the date of such Upgrade, (iv) such Upgrade
Contract is written on one of the standard forms attached as Exhibit A to this
Agreement, (v) simultaneous with the execution of the Upgrade Contract,
Trendwest shall execute a form of assignment to TFI attached to such Upgrade
Contract, and indicate on the face of the Upgrade Contract that such contract is
being sold to TFI, so that TFI can immediately execute an assignment of the
related Receivable to the Issuer, which will pledge such Receivable to the
Trustee pursuant to the Indenture, (vi) such Upgrade Contract shall be delivered
by Trendwest to the Custodian immediately after execution of such contract by
the Obligor, WorldMark and Trendwest (and, in any event, prior to the release of
the original Contract), (vii) the transfer of the Upgrade Contract shall not be
effective (and the lien of the Trustee on the existing Contract and the related
Receivable shall not be released) until after any applicable rescission period
has expired and (viii) clauses (i)-(vii) above shall be representations and
warranties of Trendwest, and Trendwest shall be obligated to purchase from the
Issuer any Upgrade Contract that does not comply with such representations and
warranties. Simultaneous with the delivery of such Upgrade Contract to the
Custodian, Trendwest shall deliver to the Trustee a supplement to this Agreement
substantially in the form of Annex A hereto subjecting such Contract to the
provisions hereof and providing with respect to such Upgrade Contract the
information required on the applicable Series Contract Schedule.
Upon the acquisition by TFI of any Upgrade Contract pursuant to the
provisions of this Section 3.04(d) (and the subsequent transfer of the related
Receivable to the Issuer), Trendwest hereby agrees that such Upgrade Contract
and the related Receivable, as applicable, will be subject to all the terms and
provisions of this Agreement, the Sale Agreement, the Servicing Agreement and
the Indenture just as if such Upgrade Contract had been one of the original
Contracts acquired on the applicable Series Closing Date.
ARTICLE 4 SELLER COVENANTS
Section 4.01. Seller Covenants. Each Seller hereby covenants and agrees
with TFI as follows:
(a) Except as hereinafter provided, such Seller will keep in full effect
its existence, rights and franchises as a corporation or limited liability
company, as applicable, and will obtain and preserve its qualification to do
business as a foreign corporation or limited liability company, as applicable,
in each jurisdiction in which such qualification is or shall be necessary to
protect the validity and enforceability of this Agreement or any of the
Contracts and to perform its duties hereunder. Any person into which such Seller
may be merged or consolidated, or to whom such Seller has sold substantially all
of its assets, or any corporation resulting from any merger, conversion or
consolidation to which such Seller shall be a party, or any Person succeeding to
the business of such Seller shall be the successor of such Seller 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;
provided, however, that (w) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 3.01(c) hereof shall have
been breached, (x) such successor executes an agreement of assumption, in form
reasonably satisfactory to the Trustee, to perform every obligation under this
Agreement, (y) such Seller shall have delivered to TFI a certificate of an
officer of such Seller and an Opinion of Counsel each stating that such
consolidation, merger, or succession and such agreement of assumption complies
with this Section 4.01 and that all conditions precedent, if any, provided for
in this Agreement relating to such transaction have been complied with, and (z)
such Seller shall have delivered to TFI an Opinion of Counsel either (1) stating
that, in the opinion of such counsel, all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of TFI in the Contracts and
reciting the details of such filings, or (2) stating that, in the opinion of
such counsel, no such action shall be necessary to preserve and protect such
interest.
(b) Neither such Seller nor any of the members, directors, officers,
employees or agents of such Seller (and, with respect to the Prior Issuer, of
the members of such Seller) shall be under any liability to TFI, the Trustee or
the Holders of Notes for any action taken or for refraining from the taking of
any action in good faith pursuant to this Agreement, or for errors in judgment
not involving recklessness or negligence; provided, however, that this provision
shall not protect such Seller against any breach of warranties or
representations made herein, or failure to perform its obligations in strict
compliance with this Agreement, or any liability which would otherwise be
imposed by reason of any breach of the terms and conditions of this Agreement.
Such Seller, and any member, director, officer, employee or agent of such Seller
(and, with respect to the Prior Issuer, of the members of such Seller), may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. Such Seller
shall not be under any obligation to appear in, prosecute, or defend any legal
action that is not incidental to its obligations as the seller of the Assets
under this Agreement and that in its opinion may involve it in any expense or
liability.
(c) Such Seller will from time to time, at its own expense, execute and
file such additional financing statements (including continuation statements) as
may be necessary or which the Trustee may deem appropriate to preserve the
security interests and liens described in Section 3.01(a)(viii) hereof and are
reasonably satisfactory in form and substance to TFI and the Issuer.
(d) Such Seller will not change its name, identity or corporate structure
in any manner that would, could, or might make any financing statement or
continuation statement misleading within the meaning of section 9-402(7) of the
UCC, unless it shall have given TFI, the Issuer and the Trustee at least 30
days' prior written notice thereof.
(e) Such Seller will give TFI, the Issuer and the Trustee at least 30 days'
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement.
(f) Such Seller will duly fulfill all obligations on its part to be
fulfilled under or in connection with each Contract, will not change or modify
the terms of the Contracts (and shall prevent any third-party originator that
still owns any Contract from changing or modifying the terms of any such
Contract) except as expressly permitted by the terms of the Transaction
Documents and will do nothing to impair the rights of TFI, the Issuer or the
Trustee in the Assets. In the event that the rights of such Seller under any
Contract or any guaranty of the related Obligor's obligations under any Contract
are not assignable to TFI or the Issuer, such Seller will enforce such rights on
behalf of TFI or the Issuer; the Seller is not aware of any such inability to
assign any Contracts.
(g) Such Seller will comply, in all material respects, with all material
acts, rules, regulations, orders, decrees and directions of any governmental
authority applicable to the Assets or any part thereof; provided, however, that
such Seller may contest any act, regulation, order, decree or direction in any
reasonable manner which shall not materially and adversely affect the rights of
TFI, the Issuer or the Trustee in the Assets.
(h) Such Seller will advise TFI, the Issuer and the Trustee promptly, in
reasonable detail, of the occurrence of any breach by such Seller following
discovery by such Seller of such breach of any of its representations,
warranties and covenants contained herein.
(i) Such Seller will execute or endorse, acknowledge, and deliver to TFI,
the Issuer and the Trustee from time to time such schedules, confirmatory
assignments, conveyances, and other reassurances or instruments and take such
further similar actions relating to the Assets, and the rights covered by the
Transaction Documents, as TFI, the Issuer or the Trustee may reasonably request
to preserve and maintain title to the Assets and the rights of the Trustee and
the Holders of Notes therein against the claims of all persons and parties.
(j) Trendwest agrees to indemnify, defend and hold TFI harmless from and
against any and all loss, liability, damage, judgment, claim, deficiency or
expense (including interest, penalties, reasonable attorney's fees and amounts
paid in settlement) that is caused by (i) a material breach at any time by any
Seller of the representations, warranties and covenants contained in Section
3.01 hereof or this Section 4.01 or (ii) any material information furnished by
any Seller which is set forth in any schedule delivered hereunder, being untrue
in any material respect when any such representation was made or schedule
delivered, provided that Trendwest shall not have any liability with respect to
a representation or warranty as to any specific Contract, Receivable or the
related Credits other than to purchase such Contract or substitute for such
Contract in accordance with Section 3.03 hereof unless such breach of
representation or warranty is the result of a Seller's fraud, negligence, bad
faith or willful misconduct. Trendwest shall also indemnify the Issuer, the
Trustee and the Servicer for any cost or expenses incurred by them in the
enforcement of this Agreement. The obligations of Trendwest under this Section
4.01(j) shall be considered to have been relied upon by TFI and shall survive
the execution, delivery and performance of this Agreement, regardless of any
investigation made by or on behalf of TFI, until termination of the Indenture.
If Trendwest has made any indemnity payments pursuant to this Section 4.01(j)
and thereafter the recipient collects any of such amounts from others, such
party will promptly repay the amount collected to Trendwest, without interest.
(k) Such Seller will do nothing to disturb or impair the acquisition
hereunder by TFI of all of such Seller's right, title and interest in the Assets
or the Issuer's rights, title or interest in the Purchased Assets.
(l) Such Seller (i) will (A) maintain its books and records separate from
the books and records of TFI and (B) maintain bank accounts separate from those
of TFI and (ii) will not (x) take, prior to the complete payment of the Notes,
any action that would cause the dissolution or liquidation of TFI, (y) guarantee
(directly or indirectly), endorse or otherwise become contingently liable
(directly or indirectly) for the obligations of TFI or (z) institute against
TFI, or join any other person in instituting against TFI, any case, proceeding
or other action under any existing or future bankruptcy, insolvency or similar
laws.
(m) Such Seller shall notify TFI, the Issuer and the Trustee promptly after
becoming aware of any Lien on any Asset.
(n) On each date as of which Trendwest substitutes a Substitute Contract in
accordance with Section 3.03 hereof, Trendwest shall provide to TFI a supplement
to this Agreement substantially in the form of Annex A hereto subjecting such
Contract to the provisions hereof and providing with respect to such Substitute
Contract the information required in the Contract Schedule.
(o) The annual financial statements of such Seller will disclose the
effects of the transactions contemplated by the Transaction Documents in
accordance with generally accepted accounting principles. The financial
statements of such Seller and TFI will also disclose that the assets of TFI are
not available to pay creditors of such Seller. The resolutions, agreements and
other instruments underlying the Transaction Documents will be continuously
maintained by such Seller as official records.
(p) Such Seller will, at its own cost and expense, (i) retain the
Electronic Ledger as a master record of the Contracts and the related Credits
and copies of all documents relating to each Contract (other than the original
executed Contracts) as custodian for the Issuer and other Persons, if any, with
interests in the Contracts and the related Credits and (ii) mark the Contracts
and the Electronic Ledger to the effect that the Contracts and such Seller's
interest in the related Credits have been acquired by TFI, that the related
Receivables subsequently have been transferred by TFI to the Issuer and a
security interest in the related Contracts and the related Credits have been
granted by TFI to the Issuer and that such Receivables, security interests and
rights have been pledged, transferred and assigned to the Trustee by the Issuer
pursuant to the Indenture.
(q) Such Seller will perform the transactions contemplated by this
Agreement in a manner that is consistent with TFI's ownership interest in the
Assets (prior to the conveyance of any part of such interest to the Issuer
pursuant to the Sale Agreement). Such Seller will respond to all third party
inquiries confirming the transfer of the Assets to TFI and of the Purchased
Assets to the Issuer.
(r) Such Seller shall immediately transfer to the Servicer for deposit in
the Clearing Account any payment it receives relating to the Assets.
Section 4.02. TFI Covenants. TFI hereby covenants and agrees with the
Sellers as follows:
(a) TFI hereby acknowledges and agrees that its rights in the related
Credits are expressly subject to the rights of the related Obligors in such
Credits pursuant to the applicable Contract.
(b) On each date as of which any interest in any Contract is to be
purchased or replaced by Trendwest pursuant to Section 3.03 hereof, TFI shall
submit to Trendwest an instrument of assignment assigning TFI's interest in such
Contract and the related Credits to Trendwest, signed by the president, senior
vice president or any vice president of TFI. Each such assignment shall operate
as an assignment, without recourse, representation, or warranty, to Trendwest of
all of TFI's right, title, and interest in and to such Contract, the related
Receivable and the related Credits and any security documents relating thereto,
such assignment being an assignment outright and not for security, and upon
payment of the Purchase Price or delivery of a Substitute Contract, Trendwest
will thereupon own such interest in the Contract and all such security and
documents, free of any further obligation to TFI with respect thereto. If in any
enforcement suit or legal proceeding it is held that Trendwest may not enforce a
Contract on the ground that it is not a real party in interest or holder
entitled to enforce the Contract, TFI shall, at TFI's expense, take such steps
as TFI deems necessary to enforce the Contract, including bringing suit in TFI's
name.
(c) TFI warrants that, except as contemplated by the Transaction Documents,
it will have ownership of or a valid security interest in the related Credits.
TFI shall not assign, sell, pledge, or exchange, or in any way encumber or
otherwise dispose of the related Credits, except as contemplated by or permitted
under the Transaction Documents.
Section 4.03. Assignment of Assets. The Sellers understand that TFI
will assign to the Issuer the Receivables and grant to the Issuer a security
interest in all its right, title and interest to this Agreement, the Contracts
and the related Credits and that the Issuer will assign to and grant to the
Trustee a security interest in such Receivables, Contracts and the related
Credits. The Sellers consent to such assignments and grants and further agree
that all representations, warranties, covenants and agreements the Sellers made
herein shall also be for the benefit of and inure to the Issuer, the Trustee and
all Holders from time to time of the Notes.
ARTICLE 5 CONDITIONS PRECEDENT
Section 5.01. Conditions to TFI's Initial Obligations. The
obligations of TFI to execute and deliver the Asset Assignment to the Sellers on
the Closing Date and the applicable Subsequent Asset Assignment to the
Subsequent Sellers on each subsequent Series Closing Date, pursuant to, and
perform it obligations pursuant to, this Agreement shall be subject to the
satisfaction of the following conditions:
(a) All representations and warranties of the Sellers contained in Sections
3.01(b) and 3.01(c) hereof and all information provided in the related Series
Contract Schedule shall be true and correct on such Series Closing Date, with
the same effect as though such representations and warranties had been made on
such date, and the applicable Sellers shall have delivered to TFI, the Issuer,
the Trustee and each original purchaser of the related Series of Notes an
Officer's Certificate to such effect;
(b) All representations and warranties of the Sellers contained in Section
3.01(a) hereof shall be true and correct on the related Series Closing Date with
respect to the Contracts listed on the related Series Contract Schedule, with
the same effect as though such representations and warranties had been made on
such date, and the applicable Sellers shall have delivered to TFI, the Issuer,
the Trustee and each original purchaser of the related Series of Notes an
Officer's Certificate to such effect;
(c) The Sellers shall have delivered all other information theretofore
required or reasonably requested by TFI to be delivered by the Sellers
hereunder, duly certified by an officer of each of the Sellers, and the Sellers
shall have substantially performed all other obligations required to be
performed as of such Series Closing Date by the provisions of this Agreement;
(d) On or prior to such Series Closing Date, Trendwest, on behalf of the
Sellers shall have delivered, or caused the delivery of, the Custodian File
related to the Contracts identified in the Contract Schedule to the Custodian or
its agent and, subject to Section 2.04 hereof, there shall have been made all
filings, recordings and/or registrations, and there shall have been given, or
taken, any notice or any other similar action, as may be necessary in the
opinion of TFI, in order to establish and preserve the right, title and interest
of TFI in such Contract and the other Assets;
(e) On or before the Closing Date, the Issuer, the Servicer, the
Subservicer and the Trustee shall have entered into the Servicing Agreement;
(f) The related Series of Notes shall be issued and sold on the related
Series Closing Date, the Issuer shall receive the full consideration due it upon
the issuance of such Notes, the Issuer shall have applied such consideration, to
the extent necessary, to pay the related consideration to TFI for the sale of
the Receivables and the grant of the security interest in the Contracts and the
Credits, and TFI shall have applied such consideration, to the extent necessary,
to pay the related Acquisition Consideration; and
(g) Each of the Sellers shall have executed and delivered the Asset
Assignment or a Subsequent Asset Assignment, as applicable.
Section 5.02. Conditions to the Sellers' Obligations. The
obligations of each of the Sellers to execute and deliver to TFI the Asset
Assignment or a Subsequent Asset Assignment, as applicable, and perform its
obligations pursuant to this Agreement on the Closing Date and each subsequent
Series Closing Date shall be subject to the satisfaction of the following
conditions:
(a) All representations and warranties of TFI contained in this Agreement
shall be true and correct with the same effect as though such representations
and warranties had been made on such date;
(b) TFI shall have executed and delivered the applicable Asset Assignment;
and
(c) All corporate and legal proceedings and all instruments in connection
with the transactions contemplated by this Agreement shall be satisfactory in
form and substance to such Seller, and such Seller shall have received from the
TFI copies of all documents (including, without limitation, records of corporate
proceedings) relevant to the transactions herein contemplated as such Seller may
reasonably have requested.
Trendwest's and TFI's obligations to repurchase the Contracts pursuant
to this Agreement shall not be affected by any failure of the Issuer to comply
with clause (a) of this Section 5.02 subsequent to the Closing Date.
ARTICLE 6 TERM AND TERMINATION
Section 6.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the later of (i) payment with respect to the last Asset or (ii) termination of
the Indenture.
Section 6.02. Default by Sellers. If any Seller shall be in default
under this Agreement and such default shall not have been cured for a period of
60 days, or if such Seller shall become insolvent or make an assignment for the
benefit of its creditors or have a receiver appointed for all or substantially
all of its properties, or if any proceedings commenced, or consented to, by such
Seller are not stayed or dismissed within 90 days after being commenced against
such Seller under any bankruptcy, insolvency or other law for the relief of
debtors, TFI shall have the right, in addition to any other rights it may have
under any applicable law, to terminate this Agreement with respect to such
Seller upon 30 days' prior written notice to such Seller; provided that any
termination of this Agreement shall not release such Seller from any obligation
under this Agreement.
ARTICLE 7 MISCELLANEOUS
Section 7.01. Amendments. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally but only by an
instrument in writing signed by the party against which enforcement is sought.
This Agreement may be amended by TFI and the Sellers only with the prior written
consent of the Holders of 66-2/3% in principal amount of the Controlling Class
of the Notes Outstanding of each Series; provided, however, that the number of
Holders of any Series required for any such amendment may be modified as set
forth in the related Series Supplement.
Section 7.02. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York, without regard to
choice of law principles.
Section 7.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered personally, mailed by
registered or certified United States mail, postage prepaid, or sent via
overnight air courier or facsimile communication and addressed, in the case of
the Sellers, to the Seller Address, and in the case of TFI, to the TFI Address.
All notices and demands shall be deemed to have been given either at the time of
the delivery thereof to any officer of the Person entitled to receive such
notices and demands at the address of such Person for notices hereunder, or on
the third day after the mailing thereof to such address, as the case may be. Any
Person may change the address for notices hereunder by giving notice of such
change to the other Person.
Section 7.04. Separability Clause. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.05. Assignment. Except as provided in Section 4.01(a),
this Agreement may not be assigned or delegated by any Seller without the prior
written consent of TFI, the Trustee and the Holders of 66-2/3% in principal
amount of the Notes of the Controlling Class of each Series Outstanding and may
not be assigned or delegated by TFI without the prior written consent of each of
the Sellers, the Trustee and the Holders of 66-2/3% in principal amount of the
Notes of the Controlling Class of each Series Outstanding.
Section 7.06. Further Assurances. Each of the Sellers and TFI agrees
to do such further acts and things and to execute and deliver to the Trustee
such additional assignments, agreements, powers and instruments as are required
by the Trustee to carry into effect the purposes of this Agreement or to better
assure and confirm unto the Trustee or the Holders of the Notes their rights,
powers or remedies hereunder. If any Obligor shall be in default under any
Contract, upon reasonable request from the Servicer, the applicable Seller will
take all reasonable steps to assist in enforcing such Contract and preserving
and maintaining title to the Assets and the rights of the Trustee and the
Holders of the Notes therein against the claims of all persons and parties to
the extent the applicable Seller is capable of performing such requested steps
and the Servicer reasonably determines that the assistance of the applicable
Seller is necessary to effect the intent and purposes hereof.
Section 7.07. No Waivers; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of TFI or the Sellers, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof
nor shall any single or partial exercise of any right, remedy, or privilege
hereunder preclude any other or further exercise hereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
Section 7.08. Binding Effect; Third Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Holders of Outstanding Notes, and their respective successors and permitted
assigns.
Section 7.09. Set-Off. (a) Each of the Sellers hereby irrevocably
and unconditionally waives all right of set-off that it may have under contract
(including this Agreement), applicable law or otherwise with respect to any
funds or monies of TFI and the Issuer at any time held by or in the possession
of such Seller.
(b) TFI and the Issuer shall have the right to set-off against each
Seller any amounts to which such Seller may be entitled and to apply such
amounts to any claims TFI and the Issuer may have against such Seller from time
to time under this Agreement. Upon any such set-off TFI shall give notice of the
amount thereof and the reasons therefor.
Section 7.10. Counterparts. This Agreement may be executed in one or more
counterparts all of which together shall constitute one original document.
<PAGE>
IN WITNESS WHEREOF, the Sellers and TF I have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
date and year first above written.
TRENDWEST RESORTS, INC., in its individual
capacity and as Seller
By
Name:
Title:
TRI FUNDING COMPANY I, L.L.C., Seller
By: TRENDWEST FUNDING I, INC., as
member
By
Name:
Title:
TW HOLDINGS, INC., Seller
By
Name:
Title:
TRENDWEST FUNDING II, INC.
By
Name:
Title:
<PAGE>
===============================================================================
===============================================================================
ANNEX A
FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
Pursuant to Section 3.04(b) and Section 3.04(d) of the Receivables
Purchase Agreement dated as of March 1, 1998 (the "Agreement"), among Trendwest
Resorts, Inc. ("Trendwest"), TRI Funding Company I, L.L.C., TW Holdings, Inc.
and Trendwest Funding II, Inc. ("TFI"), attached as Schedule I hereto is a
Supplemental Contract Schedule, which includes information regarding Assets that
are hereby sold, assigned, transferred and delivered by Trendwest to TFI in
accordance with the Agreement and the Asset Assignment and setting forth the
Collateral Value of any Contract being sold to TFI by the Issuer pursuant to an
Upgrade or exchanged pursuant to a substitution.
TRENDWEST RESORTS, INC.
By
Name:
Title:
<PAGE>
==============================================================================
==============================================================================
SCHEDULE I
SUPPLEMENTAL CONTRACT SCHEDULE FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
<PAGE>
===============================================================================
===============================================================================
EXHIBIT A
FORM OF CONTRACT
<PAGE>
===============================================================================
===============================================================================
EXHIBIT B
FORM OF ASSET ASSIGNMENT
This Asset Assignment ("Assignment") is made as of March ____, 1998
(the "Closing Date"), by and among Trendwest Resorts, Inc., an Oregon
corporation ("Trendwest"), TRI Funding Company I, L.L.C., a Delaware limited
liability company (the "Prior Issuer"), TW Holdings, Inc., a Nevada corporation,
(together with Trendwest and the Prior Issuer, the "Assignors" and each an
"Assignor") and Trendwest Funding II, Inc., a Delaware corporation ("Assignee"),
with reference to the following facts:
RECITALS:
A. In connection with the sale of certain assets of the Assignors in
conjunction with the issuance of notes on the date hereof by TRI Funding II,
Inc., Assignee and the Assignors have executed the Receivables Purchase
Agreement dated as of March 1, 1998 (the "Agreement").
B. In connection with the Agreement, each of the Assignors desires to
assign and transfer to Assignee all of such Assignor's right, title and interest
in and to each of the assets described in Schedule I hereto, and the
corresponding paragraphs below (the "Assigned Interests").
C. Assignee desires to accept this Assignment and transfer of the Assigned
Interests and assume all duties and obligations attendant thereto, accruing
after the Transfer Date.
D. Terms used but not defined herein have the meanings ascribed to them in
the Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignors and Assignee hereby agree as follows:
1. Assignment. Each Assignor hereby assigns, conveys, grants and transfers,
without recourse except as provided in the Agreement, to Assignee (and the
successors and assigns of Assignee) the following property:
1.1. Such Assignor's right, title and interest in and to the Contracts and
related Receivables described and listed on Schedule I hereto.
1.2. A security interest in the vacation credits subject to each such
Contract (the "Credits").
1.3. All other Assets relating to such Contract.
2. Assumption. Assignee hereby accepts the foregoing assignment and hereby
assumes all of the indebtedness, if any, duties and obligations incident hereto
and thereto, subject to the terms and conditions of the Agreement.
3. Further Assurance. The Assignors and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignors and Assignee hereby acknowledge that
for all purposes each of the Assignors and the Assignee are separate and
distinct legal entities. Accordingly, no Assignor shall be liable to any third
party for the debts, obligations and liabilities of the Assignee; and Assignee
shall not be liable to any third party for the debts, obligations and
liabilities of any Assignor to the extent that such debts, obligations and
liabilities have not been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted in
accordance with the laws of the State of New York, and the parties hereto hereby
acknowledge and agree that this Assignment and the transactions contemplated
hereunder were negotiated and entered into in the State of New York.
6. Authority. Each of the Assignors and the Assignee hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple counterparts,
each of which shall be deemed an original but all of which, taken together,
shall constitute one and the same instrument.
8. Successors and Assigns. Each of the Assignors and the Assignee agree
that this Assignment will be binding and will inure to the benefit of each
Assignor and its successors and assigns and the Assignee and its successors and
assigns.
<PAGE>
IN WITNESS WHEREOF, this Assignment has been executed as of the date first
above written.
TRENDWEST RESORTS, INC., Assignor
By
Name:
Title:
TRI FUNDING COMPANY I, L.L.C., Assignor
By: TRENDWEST FUNDING I, INC., as member
By
Name:
Title:
TW HOLDINGS, INC., Assignor
By
Name:
Title:
TRENDWEST FUNDING II, INC., Assignee
By
Name:
Title:
<PAGE>
==============================================================================
==============================================================================
SCHEDULE I
CONTRACT SCHEDULE
<PAGE>
===============================================================================
===============================================================================
EXHIBIT C
FORM OF SUBSEQUENT ASSET ASSIGNMENT
This Asset Assignment ("Assignment") is made as of ___________, ____
(the "Series Closing Date"), by and among Trendwest Resorts, Inc., an Oregon
corporation ("Trendwest"), TW Holdings, Inc., a Nevada corporation, (together
with Trendwest, the "Assignors" and each an "Assignor") and Trendwest Funding
II, Inc., a Delaware corporation ("Assignee"), with reference to the following
facts:
RECITALS:
A. In connection with the sale of certain assets of the Assignors in
conjunction with the issuance of notes on the date hereof by TRI Funding II,
Inc., Assignee and the Assignors have executed the Receivables Purchase
Agreement dated as of March 1, 1998 (the "Agreement").
B. In connection with the Agreement, each of the Assignors desires to
assign and transfer to Assignee all of such Assignor's right, title and interest
in and to each of the assets described in Schedule I hereto, and the
corresponding paragraphs below (the "Assigned Interests").
C. Assignee desires to accept this Assignment and transfer of the Assigned
Interests and assume all duties and obligations attendant thereto, accruing
after the Transfer Date.
D. Terms used but not defined herein have the meanings ascribed to them in
the Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignors and Assignee hereby agree as follows:
1. Assignment. Each Assignor hereby assigns, conveys, grants and transfers,
without recourse except as provided in the Agreement, to Assignee (and the
successors and assigns of Assignee) the following property:
1.1. Such Assignor's right, title and interest in and to the Contracts and
related Receivables described and listed on Schedule I hereto.
1.2. A security interest in the vacation credits subject to each such
Contract (the "Credits").
1.3. All other Assets relating to such Contract.
2. Assumption. Assignee hereby accepts the foregoing assignment and hereby
assumes all of the indebtedness, if any, duties and obligations incident hereto
and thereto, subject to the terms and conditions of the Agreement.
3. Further Assurance. The Assignors and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignors and Assignee hereby acknowledge that
for all purposes each of the Assignors and the Assignee are separate and
distinct legal entities. Accordingly, no Assignor shall be liable to any third
party for the debts, obligations and liabilities of the Assignee; and Assignee
shall not be liable to any third party for the debts, obligations and
liabilities of any Assignor to the extent that such debts, obligations and
liabilities have not been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and
interpreted in accordance with the laws of the State of New York, and the
parties hereto hereby acknowledge and agree that this Assignment and the
transactions contemplated hereunder were negotiated and entered into in the
State of New York.
6. Authority. Each of the Assignors and the Assignee hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple counterparts,
each of which shall be deemed an original but all of which, taken together,
shall constitute one and the same instrument.
8. Successors and Assigns. Each of the Assignors and the Assignee agree
that this Assignment will be binding and will inure to the benefit of each
Assignor and its successors and assigns and the Assignee and its successors and
assigns.
<PAGE>
IN WITNESS WHEREOF, this Assignment has been executed as of the date first
above written.
TRENDWEST RESORTS, INC., Assignor
By
Name:
Title:
TW HOLDINGS, INC., Assignor
By
Name:
Title:
TRENDWEST FUNDING II, INC., Assignee
By
Name:
Title:
<PAGE>
==============================================================================
==============================================================================
SCHEDULE I
CONTRACT SCHEDULE
CREDIT AGREEMENT
Dated as of February 12, 1998
among
TRENDWEST RESORTS, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Agent,
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I DEFINITIONS................................................. 1
1.01 Certain Defined Terms................................................................... 1
1.02 Other Interpretive Provisions........................................................... 15
1.03 Accounting Principles................................................................... 16
ARTICLE II THE CREDITS................................................. 17
2.01 Amounts and Terms of Commitments........................................................ 17
(a) The Revolving Credit............................................................. 17
2.02 Loan Accounts........................................................................... 17
2.03 Procedure for Borrowing................................................................. 18
2.04 Conversion and Continuation Elections................................................... 18
2.05 Voluntary Termination or Reduction of
Commitments................................................................................... 20
2.06 Repayment............................................................................... 20
2.07 Interest................................................................................ 20
2.08 Fees.................................................................................... 21
(a) Arrangement, Agency Fees........................................................ 21
(b) Commitment Fees................................................................. 21
2.09 Computation of Fees and Interest........................................................ 21
2.10 Payments by the Company................................................................. 22
2.11 Payments by the Banks to the Agent...................................................... 22
2.12 Sharing of Payments, Etc................................................................ 23
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY.................................... 24
3.01 Other Taxes............................................................................. 24
3.02 Illegality.............................................................................. 24
3.03 Increased Costs and Reduction of Return................................................. 25
3.04 Funding Losses.......................................................................... 25
3.05 Inability to Determine Rates............................................................ 26
3.06 Certificates of Banks................................................................... 26
3.07 Substitution of Banks................................................................... 26
3.08 Survival................................................................................ 27
ARTICLE IV CONDITIONS PRECEDENT............................................. 27
4.01 Conditions of Initial Loans............................................................. 27
(a) Credit Agreement............................................................ 27
(b) Resolutions; Incumbency..................................................... 27
(c) Organization Documents; Good Standing....................................... 27
(d) Legal Opinions.............................................................. 28
(e) Payment of Fees............................................................. 28
(f) Certificate................................................................. 28
(g) Other Documents............................................................. 28
<PAGE>
4.02 Conditions to All Borrowings............................................................ 28
(a) Notice of Borrowing or
Conversion/Continuation.............................................................. 28
(b) Continuation of Representations and
Warranties........................................................................... 29
(c) No Existing Default......................................................... 29
ARTICLE V REPRESENTATIONS AND WARRANTIES........................................ 29
5.01 Corporate Existence and Power........................................................... 29
5.02 Corporate Authorization; No Contravention............................................... 30
5.03 Governmental Authorization.............................................................. 30
5.04 Binding Effect.......................................................................... 30
5.05 Litigation.............................................................................. 30
5.06 No Default.............................................................................. 31
5.07 ERISA Compliance........................................................................ 31
5.08 Use of Proceeds; Margin Regulations..................................................... 32
5.09 Title to Properties..................................................................... 32
5.10 Taxes................................................................................... 32
5.11 Financial Condition..................................................................... 32
5.12 Environmental Matters................................................................... 33
5.13 Regulated Entities...................................................................... 33
5.14 No Burdensome Restrictions.............................................................. 33
5.15 Copyrights, Patents, Trademarks and Licenses,
etc........................................................................................... 33
5.16 Subsidiaries............................................................................ 33
5.17 Insurance............................................................................... 34
5.18 Swap Obligations........................................................................ 34
5.19 Full Disclosure......................................................................... 34
ARTICLE VI AFFIRMATIVE COVENANTS............................................ 34
6.01 Financial Statements.................................................................... 34
6.02 Certificates; Other Information......................................................... 35
6.03 Notices................................................................................. 36
6.04 Preservation of Corporate Existence, Etc................................................ 37
6.05 Maintenance of Property................................................................. 37
6.06 Insurance............................................................................... 37
6.07 Payment of Obligations.................................................................. 38
6.08 Compliance with Laws.................................................................... 38
6.09 Compliance with ERISA................................................................... 38
6.10 Inspection of Property and Books and Records............................................ 38
6.11 Environmental Laws...................................................................... 39
6.12 Use of Proceeds......................................................................... 39
6.13 Interest Coverage Ratio................................................................. 39
6.14 Capitalization Ratio................................................................. 39
ARTICLE VII NEGATIVE COVENANTS.............................................. 39
7.01 Limitation on Liens..................................................................... 39
7.02 Disposition of Assets................................................................... 41
ii
<PAGE>
7.03 Consolidations and Mergers.............................................................. 41
7.04 Loans and Investments................................................................... 42
7.05 Transactions with Affiliates............................................................ 43
7.06 Use of Proceeds......................................................................... 43
7.07 Contingent Obligations.................................................................. 43
7.08 Joint Ventures.......................................................................... 44
7.09 Lease Obligations....................................................................... 44
7.10 Restricted Payments..................................................................... 44
7.11 ERISA................................................................................... 45
7.12 Change in Business...................................................................... 45
7.13 Accounting Changes...................................................................... 45
7.14 Agreements by Subsidiaries.............................................................. 45
7.15 Notes Receivable..................................................................... 45
7.16 Time Share Inventory................................................................. 45
ARTICLE VIII EVENTS OF DEFAULT.............................................. 46
8.01 Event of Default........................................................................ 46
(a) Non-Payment................................................................. 46
(b) Representation or Warranty.................................................. 46
(c) Specific Defaults........................................................... 46
(d) Other Defaults.............................................................. 46
(e) Cross-Default............................................................... 46
(f) Insolvency; Voluntary Proceedings........................................... 47
(g) Involuntary Proceedings..................................................... 47
(h) ERISA....................................................................... 47
(i) Monetary Judgments.......................................................... 48
(j) Non-Monetary Judgments...................................................... 48
(k) Change of Control........................................................... 48
8.02 Remedies................................................................................ 48
8.03 Rights Not Exclusive.................................................................... 48
ARTICLE IX THE AGENT.................................................. 49
9.01 Appointment and Authorization; "Agent".................................................. 49
9.02 Delegation of Duties.................................................................... 49
9.03 Liability of Agent...................................................................... 49
9.04 Reliance by Agent....................................................................... 50
9.05 Notice of Default....................................................................... 50
9.06 Credit Decision......................................................................... 51
9.07 Indemnification of Agent................................................................ 51
9.08 Agent in Individual Capacity............................................................ 52
9.09 Successor Agent......................................................................... 52
9.10 Withholding Tax......................................................................... 52
ARTICLE X MISCELLANEOUS................................................ 54
10.01 Amendments and Waivers................................................................. 54
10.02 Notices................................................................................ 55
10.03 No Waiver; Cumulative Remedies......................................................... 55
10.04 Costs and Expenses..................................................................... 56
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10.05 Company Indemnification................................................................ 56
10.06 Payments Set Aside..................................................................... 57
10.07 Successors and Assigns................................................................. 57
10.08 Assignments, Participations, etc....................................................... 57
10.09 Confidentiality........................................................................ 59
10.10 Set-off................................................................................ 60
10.11 Automatic Debits of Fees............................................................... 60
10.12 Notification of Addresses, Lending Offices,
Etc........................................................................................... 60
10.13 Counterparts........................................................................... 60
10.14 Severability........................................................................... 60
10.15 No Third Parties Benefited............................................................. 61
10.16 Governing Law and Jurisdiction......................................................... 61
10.17 Waiver of Jury Trial................................................................... 61
10.18 Entire Agreement....................................................................... 61
10.19 Statute of Frauds...................................................................... 62
</TABLE>
SCHEDULES
Schedule 2.01 Commitments
Schedule 5.05 Litigation
Schedule 5.07 ERISA
Schedule 5.11 Permitted Liabilities
Schedule 5.12 Environmental Matters
Schedule 5.16 Subsidiaries and Minority Interests
Schedule 5.17 Insurance Matters
Schedule 7.07 Contingent Obligations
Schedule 10.02 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C-1 Form of Quarterly Compliance Certificate
Exhibit C-2 Form of Monthly Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Company's Washington
Counsel
Exhibit D-2 Form of Legal Opinion of Company's Oregon
Counsel
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Promissory Note
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CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of February 12, 1998, among
Trendwest Resorts, Inc., an Oregon corporation (the "Company"), the several
financial institutions from time to time party to this Agreement (collectively,
the "Banks"; individually, a "Bank"), and Bank of America National Trust and
Savings Association as agent for the Banks.
WHEREAS, the Banks have agreed to make available to the Company a
revolving credit facility upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the
following meanings:
"Acquisition" means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly,
in (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or the Subsidiary is the
surviving entity.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the
ownership of voting securities, membership interests, by contract, or
otherwise.
"Agent" means BofA in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.09.
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"Agent-Related Persons" means BofA and any successor agent
arising under Section 9.09, together with their respective Affiliates
(including, in the case of BofA, the Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set
forth on Schedule 10.02 or such other address as the Agent may from
time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means, with respect to Base Rate Loans,
0%, and with respect to Offshore Rate Loans, 1%.
"Arranger" means BancAmerica Robertson Stephens, a
Delaware corporation.
"Assignee" has the meaning specified in subsection
10.08(a).
"Attorney Costs" means and includes all fees and disbursements
of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory
clause hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. ss.101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BofA
in San Francisco, California, as its "reference rate." (The "reference
rate" is a rate set by BofA based upon various factors including BofA's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate.) Any change in
the reference rate announced by BofA shall take effect at the opening
of business on the day specified in the public announcement of such
change.
"Base Rate Loan" means a Loan that bears interest based on the
Base Rate.
"BofA" means Bank of America National Trust and Savings
Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of
Revolving Loans of the same Type made to the Company on the
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<PAGE>
same day by the Banks under Article II, and, other than in the case of
Base Rate Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs
under Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, San Francisco, or
Seattle are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means such a
day on which dealings are carried on in the London interbank market.
"Capital Adequacy Regulation" means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Change of Control" means Jeld-Wen, inc. shall cease to
control the Company or cease to own beneficially at least
51% of its voting stock.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.01 are satisfied or waived by all
Banks (or, in the case of subsection 4.01(e), waived by the Person
entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment" means, as to each Bank, its Revolving
Credit Commitment.
"Compliance Certificate" means a Quarterly Compliance
Certificate or a Monthly Compliance Certificate.
"Consolidated Net Worth" means the consolidated
shareholders' equity of the Company and its Subsidiaries.
"Contingent Obligation" means, as to any Person, any direct or
indirect liability of that Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligations") of another Person (the "primary obligor"), including any
obligation of that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such
primary obligation, or to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency
or any balance sheet
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<PAGE>
item, level of income or financial condition of the primary obligor,
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary
obligation, or (iv) otherwise to assure or hold harmless the holder of
any such primary obligation against loss in respect thereof (each, a
"Guaranty Obligation"); (b) with respect to any Surety Instrument
issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; (c) to
purchase any materials, supplies or other property from, or to obtain
the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Swap Contract. The
amount of any Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable amount of
the primary obligation in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably
anticipated liability in respect thereof, and in the case of other
Contingent Obligations other than in respect of Swap Contracts, shall
be equal to the maximum reasonably anticipated liability in respect
thereof and, in the case of Contingent Obligations in respect of Swap
Contracts, shall be equal to the Swap Termination Value.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other
instrument, document or agreement to which such Person is a party or by
which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under
Section 2.04, the Company (a) converts Loans of one Type to another
Type, or (b) continues as Loans of the same Type, but with a new
Interest Period, Loans having Interest Periods expiring on such date.
"Default" means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or
otherwise remedied during such time) constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"Eligible Assignee" means (a) a commercial bank
organized under the laws of the United States, or any state
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<PAGE>
thereof, and having a combined capital and surplus of at least
$100,000,000; (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of
any such country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a branch or
agency located in the United States; and (c) a Person that is primarily
engaged in the business of commercial banking and that is (i) a
Subsidiary of a Bank, (ii) a Subsidiary of a Person of which a Bank is
a Subsidiary, or (iii) a Person of which a Bank is a Subsidiary.
"Environmental Claims" means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
or responsibility for violation of any Environmental Law, or for
release or injury to the environment.
"Environmental Laws" means all 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.
"ERISA" means the Employee Retirement Income Security Act of
1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
"ERISA Event" means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Company or any ERISA Affiliate from a
Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or
4041A of ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which might reasonably be expected to constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to
5
<PAGE>
administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the
Company or any ERISA Affiliate.
"Eurodollar Reserve Percentage" has the meaning
specified in the definition of "Offshore Rate".
"Event of Default" means any of the events or
circumstances specified in Section 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and
any Governmental Authority succeeding to any of its principal
functions.
"Federal Funds Rate" means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in
subsection 2.10(a).
"FRB" means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
"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 functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive,
6
<PAGE>
legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued,
undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course
of business on ordinary terms); (c) all non-contingent reimbursement or
payment obligations with respect to Surety Instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other
title retention agreement, or incurred as financing, in either case
with respect to property acquired by the Person (even though the rights
and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property); (f) all
obligations with respect to capital leases; (g) all indebtedness
referred to in clauses (a) through (f) above secured by (or for which
the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including
accounts and contracts rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above;
Provided, that Indebtedness shall not include sales of Permitted
Receivables sold pursuant to Permitted Receivables Purchase Facilities
and indemnification, recourse or repurchase obligations thereunder. For
all purposes of this Agreement, the Indebtedness of any Person shall
include all recourse Indebtedness of any partnership or joint venture
in which such Person is a general partner or a joint venturer.
"Indemnified Liabilities" has the meaning specified in
Section 10.05.
"Indemnified Person" has the meaning specified in
Section 10.05.
"Independent Auditor" has the meaning specified in
subsection 6.01(a).
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<PAGE>
"Insolvency Proceeding" means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, composition, marshalling of assets for creditors,
or other, similar arrangement in respect of its creditors generally or
any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"Interest Payment Date" means, (i) as to any Revolving Loan
other than a Base Rate Loan, the last day of each Interest Period
applicable to such Loan, and (ii) as to any Base Rate Loan, the last
Business Day of each calendar quarter; provided, however, that if any
Interest Period for an Offshore Rate Loan exceeds three months, the
date that falls three months after the beginning of such Interest
Period and after each Interest Payment Date thereafter is also an
Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending on the date one, two,
three or six months thereafter as selected by the Company in its Notice
of Borrowing or Notice of Conversion/Continuation;
provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of
an Offshore Rate Loan, the result of such extension would be
to carry such Interest Period into another calendar month, in
which event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an Offshore
Rate Loan that begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
(iii) no Interest Period for any Loan shall extend
beyond the Revolving Termination Date.
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<PAGE>
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or other similar
legal arrangement (whether created by contract or conducted through a
separate legal entity) now or hereafter formed by the Company or any of
its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
"Lending Office" means, as to any Bank, the office or offices
of such Bank specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
10.02, or such other office or offices as such Bank may from time to
time notify the
Company and the Agent.
"Lien" means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as
debtor, under the Uniform Commercial Code or any comparable law), but
not including the interest of a lessor under an operating lease or the
interest of a purchaser of Permitted Receivables under any Permitted
Receivables Purchase Facility.
"Loan" means a Revolving Loan by a Bank to the Company under
Article II, which may be a Base Rate Loan or an Offshore Rate Loan
(each, a "Type" of Loan).
"Loan Documents" means this Agreement, any Notes, and
the Fee Letter.
"Majority Banks" means at any time Banks then holding at least
66-2/3% of the then aggregate unpaid principal amount of the Loans, or,
if no such principal amount is then outstanding, Banks then having at
least 66-2/3% of the Commitments.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or
9
<PAGE>
otherwise) of the Company or the Company and its Subsidiaries taken as
a whole; (b) a material impairment of the ability of the Company to
perform under any Loan Document and to avoid any Event of Default; or
(c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Company of any Loan Document.
"Monthly Compliance Certificate" means a certificate
substantially in the form of Exhibit C-2.
"Multiemployer Plan" means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, to which the Company or any
ERISA Affiliate makes, is making, or is obligated to make contributions
or, during the preceding three calendar years, has made, or been
obligated to make, contributions.
"Note" means a promissory note executed by the Company in
favor of a Bank pursuant to subsection 2.02(b), in substantially the
form of Exhibit F.
"Notice of Borrowing" means a notice in substantially
the form of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Company to any Bank, the Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, now existing or hereafter
arising.
"Offshore Rate" means, for any Interest Period, with respect
to Offshore Rate Loans comprising part of the same Borrowing, the rate
of interest per annum (rounded upward to the next 1/16th of 1%)
determined by the Agent as follows:
Offshore Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for
any Interest Period the maximum reserve percentage (expressed
as a decimal, rounded upward to the next 1/100th of 1%) in
effect on such day (whether or not applicable to any Bank)
under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
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<PAGE>
with respect to Eurocurrency funding (currently
referred to as "Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum
determined by the Agent to be the arithmetic mean (rounded
upward to the next 1/16th of 1%) of the rates of interest per
annum notified to the Agent by the Reference Bank as the rate
of interest at which dollar deposits in the approximate amount
of the amount of the Loan to be made or continued as, or
converted into, an Offshore Rate Loan by the Reference Bank
and having a maturity comparable to such Interest Period would
be offered to major banks in the London interbank market at
their request at approximately 11:00 a.m. (London time) two
Business Days prior to the commencement of such Interest
Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
"Offshore Rate Loan" means a Loan that bears interest based on
the Offshore Rate.
"Organization Documents" means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
"Other Taxes" means any present or future stamp, court or
documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery, performance, enforcement or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in
subsection 10.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
"Pension Plan" means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors,
maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a multiple employer plan (as described
in Section 4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
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<PAGE>
"Permitted Liens" has the meaning specified in
Section 7.01.
"Permitted Receivables" shall mean all obligations of any
obligor (whether now existing or hereafter arising) under a contract
for sale of goods or services by the Company or any of its
Subsidiaries, which shall include any obligation of such obligor
(whether now existing or hereafter arising) to pay interest, finance
charges or amounts with respect thereto, and, with respect to any of
the foregoing receivables or obligations, (a) all of the interest of
the Company or any of its Subsidiaries in the goods (including returned
goods) the sale of which gave rise to such receivable or obligation
after the passage of title thereto to any obligor, (b) all other Liens
and property subject thereto from time to time purporting to secure
payment of such receivables or obligations, and (c) all guarantees,
insurance, letters of credit and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
any such receivables or obligations.
"Permitted Receivables Purchase Facility" shall mean any
agreement of the Company or any of its Subsidiaries providing for
sales, transfers or conveyances of Permitted Receivables purporting to
be sales (and considered sales under GAAP) that do not provide,
directly or indirectly, for recourse against the seller of such
Permitted Receivables (or against any of such seller's Affiliates) by
way of a guaranty or any other support arrangement, with respect to the
amount of such Permitted Receivables (based on the financial condition
or circumstances of the obligor thereunder), other than such limited
recourse as is reasonable given market standards for transactions of a
similar type, taking into account such factors as historical bad debt
loss experience and obligor concentration levels.
"Permitted Swap Obligations" means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising
under Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets
held or reasonably anticipated by such Person, or changes in the value
of securities issued by such Person in conjunction with a securities
repurchase program not otherwise prohibited hereunder, and not for
purposes of speculation or taking a "market view;" and (b) such Swap
Contracts do not contain (i) any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party, or (ii)
any provision creating or permitting the declaration of an event of
default,
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<PAGE>
termination event or similar event upon the occurrence of an Event of
Default hereunder (other than an Event of Default under subsection
8.01(a)).
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
"Pro Rata Share" means, as to any Bank at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth
decimal place) at such time of such Bank's Commitment divided by the
combined Commitments of all Banks.
"Quarterly Compliance Certificate" means a certificate
substantially in the form of Exhibit C-1.
"Reference Bank" means BofA.
"Replacement Bank" has the meaning specified in
Section 3.07.
"Reportable Event" means, any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of
an arbitrator or of a Governmental Authority, in each case applicable
to or binding upon the Person or any of its property or to which the
Person or any of its property is subject.
"Responsible Officer" means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of
the Company, or any other officer having substantially the same
authority and responsibility.
"Revolving Commitment," as to each Bank, has the
meaning specified in Section 2.01.
"Revolving Loan" has the meaning specified in
Section 2.01.
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"Revolving Termination Date" means the earlier to occur
of:
(a) February 12, 2001; and
(b) the date on which the Commitments terminate
in accordance with the provisions of this Agreement.
"SEC" means the Securities and Exchange
Commission, or any Governmental Authority succeeding to any
of its principal functions.
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
"Surety Instruments" means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties,
shipside bonds, surety bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap or option, bond, note or bill option, interest rate
option, forward foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap, swaption,
currency option or any other, similar transaction (including any option
to enter into any of the foregoing) or any combination of the
foregoing, and, unless the context otherwise clearly requires, any
master agreement relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the mark-to-market value(s)
for such Swap Contracts, as determined [by the Company] based upon one
or more mid- market or other readily available quotations provided by
any recognized dealer in such Swap Contracts (which may include any
Bank).
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"Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar
charges, and all liabilities with respect thereto, excluding, in the
case of each Bank and the Agent, respectively, taxes imposed on or
measured by its net income by the jurisdiction (or any political
subdivision thereof) under the laws of which such Bank or the Agent, as
the case may be, is organized or maintains a lending office.
"Type" has the meaning specified in the definition of
"Loan."
"Unfunded Pension Liability" means the excess of a Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the
current value of that Plan's assets, determined in accordance with the
assumptions used for funding the Pension Plan pursuant to Section 412
of the Code for the applicable plan year.
"United States" and "U.S." each means the United States
of America.
"Vacation Credits" means ownership interests in WorldMark, The
Club that (i) entitle the owner to use a fully-furnished vacation
resort unit based on the number of Vacation Credits purchased and (ii)
are created through the transfer to WorldMark, the Club of resort units
developed or purchased by the Company in exchange for the right to sell
Vacation Credits in these properties based on the number of credits
available, as determined using a formula based on the number of user
days available and the relative value of each property.
"Wholly-Owned Subsidiary" means any corporation in which
(other than directors' qualifying shares required by law) 100% of the
capital stock of each class having ordinary voting power, and 100% of
the capital stock of every other class, in each case, at the time as of
which any determination is being made, is owned, beneficially and of
record, by the Company, or by one or more of the other Wholly-Owned
Subsidiaries, or both.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
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(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks by way of
consent, approval or waiver shall be deemed modified by the phrase "in its/their
sole discretion."
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
1.03 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
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ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments.
(a) The Revolving Credit. Each Bank severally agrees, on the
terms and conditions set forth herein, to make loans to the Company (each such
loan, a "Revolving Loan") from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding the amount set forth on Schedule
2.01 (such amount, as the same may be reduced under Section 2.05 or as a result
of one or more assignments under Section 10.08, the Bank's "Revolving Credit
Commitment"); provided, however, that, after giving effect to any Borrowing of
Revolving Loans, the aggregate principal amount of all outstanding Revolving
Loans shall not at any time exceed the combined Revolving Credit Commitments.
(b) Within the limits of each Bank's Revolving Credit
Commitment, and subject to the other terms and conditions hereof, the Company
may borrow, prepay, and reborrow.
2.02 Loan Accounts.
(a) The Loans made by each Bank shall be evidenced by one or
more loan accounts or records maintained by such Bank in the ordinary course of
business. The loan accounts or records maintained by the Agent and each Bank
shall be, absent manifest error, conclusive evidence of the amount of the Loans
made by the Banks to the Company and the interest and payments thereon. Any
failure so to record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Company hereunder to pay any amount owing
with respect to the Loans.
(b) Upon the request of any Bank made through the Agent, the
Loans made by such Bank may be evidenced by one or more Notes, instead of or in
addition to loan accounts. Each such Bank shall endorse on the schedules annexed
to its Note(s) the date, amount and maturity of each Loan made by it and the
amount of each payment of principal made by the Company with respect thereto.
Each such Bank is irrevocably authorized by the Company to endorse its Note(s)
and each Bank's record shall be conclusive absent manifest error; provided,
however, that the failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise affect the
obligations of the Company hereunder or under any such Note to such Bank.
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2.03 Procedure for Borrowing.
(a) Each Borrowing shall be made upon the Company's
irrevocable written notice delivered to the Agent in the form of a Notice of
Borrowing (which notice must be received by the Agent prior to 9:00 a.m. Seattle
time) (i) three Business Days prior to the requested Borrowing Date, in the case
of Offshore Rate Loans; and (ii) on the requested Borrowing Date, in the case of
Base Rate Loans, specifying:
(A) the amount of the Borrowing, which shall
be in an aggregate minimum amount of $1,000,000 or any
multiple of $100,000 in excess thereof;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising the
Borrowing; and
(D) the duration of the Interest Period
applicable to any Offshore Rate Loans included in such notice.
If the Notice of Borrowing fails to specify the duration of
the Interest Period for any Borrowing comprised of Offshore
Rate Loans, such Interest Period
shall be three months.
(b) The Agent will promptly notify each Bank of its receipt of
any Notice of Borrowing of a Revolving Loan and of the amount of such Bank's Pro
Rata Share of that Borrowing.
(c) Each Bank will make available to the Agent for the account
of the Company at the Agent's Payment Office by 11:00 a.m. (Seattle time) on the
Borrowing Date requested by the Company in funds immediately available to the
Agent the amount of such Bank's Pro Rata Share of each Borrowing of a Revolving
Loan. The proceeds of all such Loans will then be made available to the Company
by the Agent at such office by crediting the account of the Company on the books
of BofA with the aggregate of the amounts made available to the Agent by the
Banks and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, unless the Agent
shall otherwise consent, there may not be more than six different Interest
Periods in effect.
2.04 Conversion and Continuation Elections. (a) The
Company may, upon irrevocable written notice to the Agent in
accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans (other than Swing Loans), or as of the last day of the
applicable Interest Period, in the case of Offshore Rate Loans, to
convert any such Loans (or any part
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thereof in an amount not less than $1,000,000, or that is in an
integral multiple of $100,000 in excess thereof) into Loans of any
other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Loans having Interest Periods expiring
on such day (or any part thereof in an amount not less than $1,000,000,
or that is in an integral multiple of $100,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans, and on and after such date the right
of the Company to continue such Loans as, and convert such Loans into, Offshore
Rate Loans shall terminate.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than 9:00 a.m.
(Seattle time) at least (i) three Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Offshore Rate Loans; and (ii) on the Conversion/Continuation Date, if the
Loans are to be converted into Base Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) other than in the case of conversions
into Base Rate Loans, the duration of the requested Interest
Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans, or if any Default or Event
of Default then exists, the Company shall be deemed to have elected to convert
such Offshore Rate Loans into Base Rate Loans effective as of the expiration
date of such Interest Period.
(d) The Agent will promptly notify each Bank of its receipt of
a Notice of Conversion/Continuation, or, if no timely notice is provided by the
Company, the Agent will promptly notify each Bank of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Bank.
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(e) Unless the Majority Banks otherwise consent, during the
existence of a Default or Event of Default, the Company may not elect to have a
Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, unless the Agent shall otherwise consent, there may not be more than six
different Interest Periods in effect.
2.05 Voluntary Termination or Reduction of Commitments. The
Company may, upon not less than five Business Days' prior notice
to the Agent, terminate the Commitments, or permanently reduce
the Commitments by an aggregate minimum amount of $1,000,000 or
any multiple of $100,000 in excess thereof; unless, after giving
effect thereto and to any prepayments of Loans made on the
effective date thereof, the then-outstanding principal amount of
the Loans would exceed the amount of the combined Commitments
then in effect. Once reduced in accordance with this Section,
the Commitments may not be increased. Any reduction of the
Commitments shall be applied to each Bank according to its Pro
Rata Share. All accrued commitment fees to, but not including
the effective date of any reduction or termination of
Commitments, shall be paid on the effective date of such
reduction or termination.
2.06 Repayment. The Company shall repay to the Agent for the account of
the Banks on the Revolving Termination Date the aggregate principal amount of
Loans outstanding on such date.
2.07 Interest.
(a) Each Revolving Loan shall bear interest on the outstanding
principal amount thereof from the applicable Borrowing Date at a rate per annum
equal to the Offshore Rate or the Base Rate, as the case may be (and subject to
the Company's right to convert to other Types of Loans under Section 2.04), plus
the Applicable Margin.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. During the existence of any Event of Default, interest
shall be paid on demand of the Agent at the request or with the consent of the
Majority Banks.
(c) Notwithstanding subsection (a) of this Section, if any
amount of principal of or interest on any Loan, or any other amount payable
hereunder or under any other Loan Document is not paid in full when due (whether
at stated maturity, by acceleration, demand or otherwise), the Company agrees to
pay interest on such unpaid principal or other amount, from the date such amount
becomes due until the date such amount is paid in full, and after as well as
before any entry of judgment thereon
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to the extent permitted by law, payable on demand, at a fluctuating rate per
annum equal to the Base Rate plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Bank hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Bank would be contrary to
the provisions of any law applicable to such Bank limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such Bank,
and in such event the Company shall pay such Bank interest at the highest rate
permitted by applicable law.
2.08 Fees.
(a) Arrangement, Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account, and shall pay an
agency fee to the Agent for the Agent's own account, as required by the letter
agreement ("Fee Letter") between the Company and the Arranger and Agent dated
November 18, 1997.
(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Bank a commitment fee on the average daily unused portion of
such Bank's Revolving Commitment, computed on a quarterly basis in arrears on
the last Business Day of each calendar quarter based upon the daily utilization
for that quarter as calculated by the Agent, equal to 0.3% per annum. Such
commitment fee shall accrue from the Closing Date to the Revolving Termination
Date and shall be due and payable quarterly in arrears on the last Business Day
of each quarter commencing on March 31, 1998 through the Revolving Termination
Date, with the final payment to be made on the Revolving Termination Date;
provided that, in connection with any reduction or termination of Commitments
under Section 2.05, the accrued commitment fee calculated for the period ending
on such date shall also be paid on the date of such reduction or termination,
with the following quarterly payment being calculated on the basis of the period
from such reduction or termination date to such quarterly payment date. The
commitment fees provided in this subsection shall accrue at all times after the
above-mentioned commencement date, including at any time during which one or
more conditions in Article IV are not met.
2.09 Computation of Fees and Interest.
(a) All computations of interest for Base Rate Loans when the
Base Rate is determined by BofA's "reference rate" shall be made on the basis of
a year of 365 or 366 days, as the case may be, and actual days elapsed. All
other computations of fees and interest shall be made on the basis of a 360-day
year and actual days elapsed (which results in more interest being paid
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than if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Banks in the absence of manifest
error. The Agent will, at the request of the Company or any Bank, deliver to the
Company or the Bank, as the case may be, a statement showing the quotations used
by the Agent in determining any interest rate and the resulting interest rate.
2.10 Payments by the Company.
(a) All payments to be made by the Company shall be made without
set-off, recoupment, counterclaim or other deduction. Except as otherwise
expressly provided herein, all payments by the Company shall be made to the
Agent for the account of the Banks at the Agent's Payment Office, and shall be
made in dollars and in immediately available funds, no later than 11:00 a.m.
(Seattle time) on the date specified herein. The Agent will promptly distribute
to each Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received by the
Agent later than 11:00 a.m. (Seattle time) shall be deemed to have been received
on the following Business Day and any applicable interest or fee shall continue
to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Banks that the Company will not make
such payment in full as and when required, the Agent may assume that the Company
has made such payment in full to the Agent on such date in immediately available
funds and the Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Bank on such due date an amount equal to the
amount then due such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent on demand such
amount distributed to such Bank, together with interest thereon at the Federal
Funds Rate for each day from the date such amount is distributed to such Bank
until the date repaid.
2.11 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on
or prior to the Closing Date or, with respect to any Borrowing
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after the Closing Date, at least one Business Day prior to the date of such
Borrowing, that such Bank will not make available as and when required hereunder
to the Agent for the account of the Company the amount of that Bank's Pro Rata
Share of the Borrowing, the Agent may assume that each Bank has made such amount
available to the Agent in immediately available funds on the Borrowing Date and
the Agent may (but shall not be so required), in reliance upon such assumption,
make available to the Company on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to the Agent in
immediately available funds and the Agent in such circumstances has made
available to the Company such amount, that Bank shall on the Business Day
following such Borrowing Date make such amount available to the Agent, together
with interest at the Federal Funds Rate for each day during such period. A
notice of the Agent submitted to any Bank with respect to amounts owing under
this subsection (a) shall be conclusive, absent manifest error. If such amount
is so made available, such payment to the Agent shall constitute such Bank's
Loan on the date of Borrowing for all purposes of this Agreement. If such amount
is not made available to the Agent on the Business Day following the Borrowing
Date, the Agent will notify the Company of such failure to fund and, upon demand
by the Agent, the Company shall pay such amount to the Agent for the Agent's
account, together with interest thereon for each day elapsed since the date of
such Borrowing, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing
Date shall not relieve any other Bank of any obligation hereunder to make a Loan
on such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.12 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify the Agent of
such fact, and (b) purchase from the other Banks such participations in the
Loans made by them as shall be necessary to cause such purchasing Bank to share
the excess payment pro rata with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from the purchasing
Bank, such purchase shall to that extent be rescinded and each other Bank shall
repay to the purchasing Bank the purchase price paid therefor, together with an
amount equal to such paying Bank's ratable share (according to the proportion of
(i) the amount of such paying Bank's required repayment to (ii) the total amount
so recovered from the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so recovered. The
Company agrees that any Bank so purchasing a participation from another Bank
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may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off, but subject to Section 10.10) with respect to
such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation. The Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Other Taxes. The Company shall pay all Other Taxes.
3.02 Illegality.
(a) If any Bank determines that the introduction of any
Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Bank or its applicable Lending Office to make
Offshore Rate Loans, then, on notice thereof by the Bank to the Company through
the Agent, any obligation of that Bank to make Offshore Rate Loans shall be
suspended until the Bank notifies the Agent and the Company that the
circumstances giving rise to such determination no longer exist.
(b) If a Bank determines that it is unlawful to maintain any
Offshore Rate Loan, the Company shall, upon its receipt of notice of such fact
and demand from such Bank (with a copy to the Agent), prepay in full such
Offshore Rate Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.04, either on the last day
of the Interest Period thereof, if the Bank may lawfully continue to maintain
such Offshore Rate Loans to such day, or immediately, if the Bank may not
lawfully continue to maintain such Offshore Rate Loan. If the Company is
required to so prepay any Offshore Rate Loan, then concurrently with such
prepayment, the Company shall borrow from the affected Bank, in the amount of
such repayment, a Base Rate Loan.
(c) If the obligation of any Bank to make or maintain Offshore
Rate Loans has been so terminated or suspended, the Company may elect, by giving
notice to the Bank through the Agent that all Loans which would otherwise be
made by the Bank as Offshore Rate Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section,
the affected Bank shall designate a different Lending Office with respect to its
Offshore Rate Loans if such designation will avoid the need for giving such
notice or making
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such demand and will not, in the judgment of the Bank, be illegal or otherwise
disadvantageous to the Bank.
3.03 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the
introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the Offshore
Rate or in respect of the assessment rate payable by any Bank to the FDIC for
insuring U.S. deposits) in or in the interpretation of any law or regulation or
(ii) the compliance by that Bank with any guideline or request from any central
bank or other Governmental Authority (whether or not having the force of law),
there shall be any increase in the cost to such Bank of agreeing to make or
making, funding or maintaining any Offshore Rate Loans, then the Company shall
be liable for, and shall from time to time, upon demand (with a copy of such
demand to be sent to the Agent), pay to the Agent for the account of such Bank,
additional amounts as are sufficient to compensate such Bank for such increased
costs.
(b) If any Bank shall have determined that (i) the introduction
of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Bank (or its Lending Office) or any corporation controlling the Bank with
any Capital Adequacy Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any corporation controlling
the Bank and (taking into consideration such Bank's or such corporation's
policies with respect to capital adequacy and such Bank's desired return on
capital) determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations under this
Agreement, then, upon demand of such Bank to the Company through the Agent, the
Company shall pay to the Bank, from time to time as specified by the Bank,
additional amounts sufficient to compensate the Bank for such increase.
3.04 Funding Losses. The Company shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Company to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
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(c) the prepayment or other payment (including after
acceleration thereof) of an Offshore Rate Loan on a day that is not the last day
of the relevant Interest Period; or
(d) the automatic conversion under Section 2.04 of any Offshore
Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Banks under this Section and
under subsection 3.03(a), each Offshore Rate Loan made by a Bank (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the LIBOR used in determining the Offshore Rate
for such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.
3.05 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or that the Offshore Rate applicable pursuant to subsection 2.07(a) for
any requested Interest Period with respect to a proposed Offshore Rate Loan does
not adequately and fairly reflect the cost to the Banks of funding such Loan,
the Agent will promptly so notify the Company and each Bank. Thereafter, the
obligation of the Banks to make or maintain Offshore Rate Loans hereunder shall
be suspended until the Agent revokes such notice in writing. Upon receipt of
such notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Company does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Company, in the amount specified in the applicable notice submitted by the
Company, but such Loans shall be made, converted or continued as Base Rate Loans
instead of Offshore Rate Loans.
3.06 Certificates of Banks. Any Bank claiming reimbursement or
compensation under this Article III shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the amount payable
to the Bank hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
3.07 Substitution of Banks. Upon the receipt by the Company from any
Bank (an "Affected Bank") of a claim for compensation under Section 3.03, the
Company may: (i) request the Affected Bank to use its best efforts to obtain a
replacement bank or financial institution (which shall, in any event, be an
Eligible Assignee) satisfactory to the Company to acquire and assume all
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or a ratable part of all of such Affected Bank's Loans and Commitment (a
"Replacement Bank"); (ii) request one more of the other Banks to acquire and
assume all or part of such Affected Bank's Loans and Commitment; or (iii)
designate a Replacement Bank. Any such designation of a Replacement Bank under
clause (i) or (iii), or of an existing Bank under clause (ii), shall be subject
to the prior written consent of the Agent (which consent shall not be
unreasonably withheld) and shall be effected in accordance with the assignment
provisions contained in Section 10.08; provided, however, that the Company shall
be liable to any Affected Bank for any amounts arising under Section 3.04 as a
result of a Bank's or Replacement Bank's acquisition of such Affected Bank's
Commitment or Loans on a date other than the last day of the applicable Interest
Period for Offshore Loans then outstanding.
3.08 Survival. The agreements and obligations of the Company in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of each Bank to make
its initial Loan hereunder is subject to the condition that the Agent shall have
received on or before the Closing Date all of the following, in form and
substance satisfactory to the Agent and each Bank, and in sufficient copies for
each Bank:
(a) Credit Agreement. This Agreement executed by
each party thereto;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company authorizing the transactions
contemplated hereby, certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Company; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers of the Company authorized to execute, deliver and perform, as
applicable, this Agreement, and all other Loan Documents to be delivered
by it hereunder;
(c) Organization Documents; Good Standing. Each of
the following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company as in effect on the Closing
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Date, certified by the Secretary or Assistant Secretary of
the Company as of the Closing Date; and
(ii) a good standing certificate for the Company
from the Secretary of State of Oregon and the Secretary of
State of Washington.
(d) Legal Opinions. An opinion of Robert Klein, Washington
counsel to the Company, and of Heidi Neel, Oregon counsel to the Company, each
addressed to the Agent, substantially in the form of Exhibit D-1 and Exhibit
D-2, respectively.
(e) Payment of Fees. Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with Attorney Costs of the Agent to the extent
invoiced prior to or on the Closing Date, plus such additional amounts of
Attorney Costs as shall constitute the Agent's reasonable estimate of Attorney
Costs incurred or to be incurred by it through the closing proceedings (provided
that such estimate shall not thereafter preclude final settling of accounts
between the Company and the Agent); including any such costs, fees and expenses
arising under or referenced in Sections 2.08 and 10.04;
(f) Certificate. A certificate signed by a
Responsible Officer, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article V are true and correct on and as of such date, as
though made on and as of such date;
(ii) no Default or Event of Default exists or
would result from the initial Borrowing; and
(iii) there has occurred since December 31,
1996, no event or circumstance that has resulted or could
reasonably be expected to result in a Material Adverse
Effect; and
(g) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may request.
4.02 Conditions to All Borrowings. The obligation of each Bank to make
any Loan to be made by it (including its initial Loan) or to continue or convert
any Loan under Section 2.04 is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date:
(a) Notice of Borrowing or Conversion/Continuation.
The Agent shall have received (with, in the case of the initial
Loan only, a copy for each Bank) a Notice of Borrowing or a
Notice of Conversion/Continuation, as applicable;
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(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date or Conversion/ Continuation Date with the same effect as
if made on and as of such Borrowing Date or Conversion/Continuation Date (except
to the extent such representations and warranties expressly refer to an earlier
date, in which case they shall be true and correct as of such earlier date); and
(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing or
continuation or conversion.
(d) In the case of a Borrowing, the total principal amount of
Loans outstanding as a result of Loans made on any Borrowing Date shall not
exceed the sum of (i) 50% of inventory, including (x) costs of unsold Vacation
Credits and (y) construction in progress, and (ii) 75% of Unencumbered Notes
Receivable, determined in each case as of the date of the most recent Monthly
Compliance Certificate furnished pursuant to subsection 6.02(c). "Unencumbered
Notes Receivable" means notes receivable, net of allowance for doubtful accounts
and sales returns and net of residual interest in notes receivable sold.
Each Notice of Borrowing and Notice of Conversion/Continuation submitted by the
Company hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Borrowing Date or
Conversion/Continuation Date, as applicable, that the conditions in this Section
4.02 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Bank that:
5.01 Corporate Existence and Power. The Company and each of
its Subsidiaries:
(a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on its business
and to execute, deliver, and perform its obligations under the Loan Documents;
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(c) is duly qualified as a foreign corporation and is licensed
and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law; except, in
each case referred to in clause (c) or clause (d), to the extent that the
failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.02 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement and each other Loan Document to
which the Company is party, have been duly authorized by all necessary corporate
action, and do not and will not:
(a) contravene the terms of any of the Company's
Organization Documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company is a party or any order, injunction, writ or
decree of any Governmental Authority to which the Company or its property is
subject; or
(c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Company or
any of its Subsidiaries of the Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.05 Litigation. Except as specifically disclosed in Schedule 5.05,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company, or its
Subsidiaries or any of their respective properties which:
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(a) purport to affect or pertain to this Agreement or
any other Loan Document, or any of the transactions contemplated
hereby or thereby; or
(b) if determined adversely to the Company or its Subsidiaries,
would reasonably be expected to have a Material Adverse Effect. No injunction,
writ, temporary restraining order or any order of any nature has been issued by
any court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document,
or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
5.06 No Default. No Default or Event of Default exists or would result
from the incurring of any Obligations by the Company. As of the Closing Date,
neither the Company nor any Subsidiary is in default under or with respect to
any Contractual Obligation in any respect which, individually or together with
all such defaults, could reasonably be expected to have a Material Adverse
Effect, or that would, if such default had occurred after the Closing Date,
create an Event of Default under subsection 8.01(e).
5.07 ERISA Compliance. Except as specifically disclosed in
Schedule 5.07:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has requested
a favorable determination letter from the IRS and to the best knowledge of the
Company, nothing has occurred which would prevent receipt of such a letter. The
Company and each ERISA Affiliate has made all required contributions to any Plan
subject to Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the Code has
been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of Company,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan which
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
(c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither
the Company nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA);
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(iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and
(v) neither the Company nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.
5.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are
to be used solely for the purposes set forth in and permitted by Section 6.12
and Section 7.07. Neither the Company nor any Subsidiary is generally engaged in
the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary have good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed all Federal and
other material tax returns and reports required to be filed, and have paid all
Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against the Company or
any Subsidiary that would, if made, have a Material Adverse Effect.
5.11 Financial Condition.
(a) The unaudited consolidated financial statements of the
Company and its Subsidiaries dated September 30, 1997, and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for the fiscal year ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, subject to ordinary, good faith year
end audit adjustments;
(ii) fairly present the financial condition of
the Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) except as specifically disclosed in
Schedule 5.11, show all material indebtedness and other
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liabilities, direct or contingent, of the Company and its consolidated
Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and Contingent Obligations.
(b) Since September 30, 1997, there has been no
Material Adverse Effect.
5.12 Environmental Matters. The Company conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and existing
Environmental Claims on its business, operations and properties, and as a result
thereof the Company has reasonably concluded that, except as specifically
disclosed in Schedule 5.12, such Environmental Laws and Environmental Claims
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
5.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary, is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
5.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement of Law, which could
reasonably be expected to have a Material Adverse Effect.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 5.05, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
could reasonably be expected to have a Material Adverse Effect.
5.16 Subsidiaries. The Company has no Subsidiaries other
than those specifically disclosed in part (a) of Schedule 5.16
hereto and has no equity investments in any other corporation or
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entity other than those specifically disclosed in part (b) of
Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in Schedule 5.17, the
properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Company or such Subsidiary operates.
5.18 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
5.19 Full Disclosure. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents (including the offering and disclosure materials delivered by or on
behalf of the Company to the Banks prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
6.01 Financial Statements. The Company shall deliver to the
Agent and each Bank, in form and detail satisfactory to the Agent
and the Majority Banks:
(a) As soon as available and in any event within 60 days after
the close of each fiscal quarter of Company (90 days after the close of the
fourth quarter), its unaudited (1) consolidated balance sheet of the Company and
its consolidated subsidiaries as at the end of such fiscal quarter
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setting forth in comparative form the corresponding figures as at the end of the
preceding fiscal quarter, and (2) consolidated statement of income,
shareholders' equity, and cash flows of the Company and its consolidated
subsidiaries for such fiscal quarter of the Company and for the portion of the
fiscal year ended with such period, setting forth in comparative form the
corresponding figures for the previous fiscal quarter with transactions and
account balances accounted for in conformity with GAAP applied on a basis
consistent with that of the preceding quarter or containing disclosure of the
effect on financial position or results of operations of any change in the
application of accounting principles during the quarter.
(b) As soon as available and in any event within 120 days after
the close of each fiscal year of the Company, (1) the consolidated balance sheet
of Company and its consolidated subsidiaries as at the end of such fiscal year,
setting forth in comparative form the corresponding figures as at the end of the
preceding fiscal year, and (2) the consolidated statement of income,
shareholders' equity and cash flows of the Company and its consolidated
subsidiaries for such fiscal year of the Company, setting forth in comparative
form the corresponding figures for the previous fiscal year, prepared in
conformity with GAAP applied on a basis consistent with that of the preceding
year or containing disclosure of the effect on financial position or results of
operations of any change in the application of accounting principles during the
year. Such consolidated balance sheets and related statements of income,
shareholders' equity and cash flows shall be accompanied by an unqualified
report and opinion of KPMG Peat Marwick LLP or other independent public
accountants of nationally recognized standing approved by Agent (the
"Independent Auditor"), which report and opinion shall be in accordance with
generally accepted auditing standards relating to reporting or, if qualified,
the opinion shall not be qualified due to any limitation in scope of the
examination or due to any departure from any generally accepted accounting
principles, and shall be accompanied by a statement of the Independent Auditor
that, in making the audit necessary for the certification of such financial
statements and such report, the Independent Auditor has obtained no knowledge of
any Default or Event of Default hereunder or of any default under any other
evidence of Indebtedness or, if in the opinion of the Independent Auditor any
such Default shall exist, shall include a statement as to the nature and status
thereof.
6.02 Certificates; Other Information. The Company shall
furnish to the Agent and each Bank:
(a) concurrently with the delivery of the financial
statements referred to in subsections 6.01(a) and (b), a
Quarterly Compliance Certificate executed by a Responsible
Officer;
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(b) within 45 days after the close of each calendar
month a Monthly Compliance Certificate executed by a Responsible
Officer;
(c) promptly, copies of all financial statements and reports
that the Company sends to its shareholders, and copies of all financial
statements and regular, periodical or special reports (including Forms 10K, 10Q
and 8K) that the Company or any Subsidiary may make to, or file with, the SEC;
and
(e) promptly, such additional information regarding the
business, financial or corporate affairs of the Company or any Subsidiary as the
Agent, at the request of any Bank, may from time to time request.
6.03 Notices. The Company shall promptly notify the Agent
and each Bank:
(a) of the occurrence of any Default or Event of
Default, and of the occurrence or existence of any event or
circumstance that foreseeably will become a Default or Event of
Default;
(b) of any matter that has resulted or may result in a Material
Adverse Effect, including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any Subsidiary; (ii) any
dispute, litigation, investigation, proceeding or suspension between the Company
or any Subsidiary and any Governmental Authority; or (iii) the commencement of,
or any material development in, any litigation or proceeding affecting the
Company or any Subsidiary; including pursuant to any applicable Environmental
Laws;
(c) of the occurrence of any of the following events affecting
the Company or any ERISA Affiliate (but in no event more than 10 days after such
event), and deliver to the Agent and each Bank a copy of any notice with respect
to such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the Code
by the Company or any ERISA Affiliate; or
(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment results in a
material increase in contributions or Unfunded Pension Liability.
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(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries;
(e) upon the request from time to time of the Agent, the Swap
Termination Values, together with a description of the method by which such
values were determined, relating to any then-outstanding Swap Contracts to which
the Company or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 6.03(a) shall describe with particularity any and all clauses
or provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company
shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect
its corporate existence and good standing under the laws of its
state or jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 7.03 and sales of assets
permitted by Section 7.02;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
6.05 Maintenance of Property. The Company shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is used
or useful in its business in good working order and condition, ordinary wear and
tear excepted and make all necessary repairs thereto and renewals and
replacements thereof except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect, except as permitted by Section 7.02.
6.06 Insurance. The Company shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable independent
insurers, insurance with respect to its properties and business against loss or
damage of the kinds customarily
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insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar circumstances
by such other Persons.
6.07 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
(c) all indebtedness, as and when due and payable,
but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
6.09 Compliance with ERISA. The Company shall, and shall cause each of
its ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law; (b) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification; and (c) make all required contributions to
any Plan subject to Section 412 of the Code.
6.10 Inspection of Property and Books and Records. The Company shall
maintain and shall cause each Subsidiary to maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP
consistently applied shall be made of all financial transactions and matters
involving the assets and business of the Company and such Subsidiary. The
Company shall permit, and shall cause each Subsidiary to permit, representatives
and independent contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective corporate, financial
and operating records, and make copies thereof or abstracts therefrom, and to
discuss their respective affairs, finances and accounts with their respective
directors, officers, and independent public accountants, at such reasonable
times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to the Company; provided, however, when an Event
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of Default exists the Agent or any Bank may do any of the foregoing at the
expense of the Company at any time during normal business hours and without
advance notice.
6.11 Environmental Laws. The Company shall, and shall cause
each Subsidiary to, conduct its operations and keep and maintain
its property in compliance with all Environmental Laws.
6.12 Use of Proceeds. The Company shall use the proceeds of the Loans
for working capital, refinancing debt, making Acquisitions and other general
corporate purposes not in contravention of any Requirement of Law or of any Loan
Document.
6.13 Interest Coverage Ratio. The Company shall maintain at the close of
each fiscal quarter an Interest Coverage Ratio of at least 6.0 to 1.0. "Interest
Coverage Ratio" means the ratio of (a) the consolidated net income of the
Company and its Subsidiaries, determined in accordance with GAAP but without
deducting expenses for interest, taxes on income, depreciation, or amortization,
for the period of four consecutive fiscal quarters of the Company ending at the
close of the fiscal quarter last ended to (b) the consolidated interest expense
of the Company and the Subsidiaries for such period.
6.14 Capitalization Ratio. The Company shall maintain as of
the close of each fiscal quarter a Capitalization Ratio equal to
or less than 1.0 to 2.0. "Capitalization Ratio" means the ratio
of (a) Consolidated Indebtedness to (b) Consolidated Net Worth.
"Consolidated Indebtedness" means the consolidated Indebtedness
of the Company and its Subsidiaries.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall not suffer or
permit any Subsidiary to, directly or indirectly, make, create, incur, assume or
suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Liens"):
(a) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that non-payment thereof is permitted by Section 6.07, provided that no
notice of lien has been filed or recorded under the Code;
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(b) Carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(c) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(d) Liens on the property of the Company or its Subsidiary
securing (i) the non-delinquent performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, (ii) contingent obligations
on surety and appeal bonds, and (iii) other non-delinquent obligations of a like
nature; in each case, incurred in the ordinary course of business;
(e) Liens consisting of judgment or judicial attachment liens,
provided that the enforcement of such Liens is effectively stayed and all such
liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $1,000,000;
(f) Easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(g) Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, and (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution; and
(h) Liens consisting of pledges of cash collateral or
government securities to secure on a mark-to-market basis
Permitted Swap Obligations only, provided that (i) the counterparty to any Swap
Contract relating to any such Permitted Swap Obligation is under a similar
requirement to deliver similar collateral from time to time to the Company or
the Subsidiary party thereto on a mark-to-market basis; and (ii) the aggregate
value of such collateral so pledged by the Company and the
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Subsidiaries together in favor of any counterparty does not at
any time exceed $1,000,000;
(i) Liens on the Company's headquarters building
securing Indebtedness not exceeding $10,000,000 at any time; and
(j) Liens on other property securing Indebtedness; provided,
that, (i) the aggregate amount of secured Indebtedness does not exceed 5% of
Consolidated Net Worth and (ii) in the case of Indebtedness of a Subsidiary, the
Indebtedness is permitted by Section 7.05.
7.02 Disposition of Assets. The Company shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of (whether in one or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
(a) dispositions of inventory, or used, worn-out or
surplus equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment;
(c) dispositions of property by the Company or any
Subsidiary to the Company or any Subsidiary pursuant to
reasonable business requirements;
(d) dispositions of Permitted Receivables pursuant to
Permitted Receivables Purchase Facilities; and
(e) dispositions not otherwise permitted hereunder which are
made for fair market value; provided, that (i) at the time of any disposition,
no Event of Default shall exist or shall result from such disposition, (ii) the
aggregate sales price from such disposition shall be paid in cash, and (iii) the
aggregate value of all assets so sold by the Company and its Subsidiaries,
together, during any fiscal year shall not exceed 5% of Consolidated Net Worth
at the close of the immediately preceding fiscal year.
7.03 Consolidations and Mergers. The Company shall not, and shall not
suffer or permit any Subsidiary to, merge, consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions all or substantially all of its assets (whether now owned
or hereafter acquired) to or in favor of any Person, except:
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(a) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to the
Company or another Wholly-Owned Subsidiary;
(c) the Company or any Subsidiary may sell assets to
the extent permitted by subsection 7.02(d) or (e); and
(d) the Company or any Subsidiary may enter into a
merger if it is an Acquisition permitted by subsection 7.04(d).
7.04 Loans and Investments. The Company shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person
including any Affiliate of the Company (together, "Investments"), except for:
(a) Investments held by the Company or Subsidiary in
the form of cash equivalents;
(b) Extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business;
(c) Extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned
Subsidiaries to another of its Wholly-Owned Subsidiaries;
(d) Investments incurred in order to consummate Acquisitions
otherwise permitted herein, provided that (i) the book value (as to the
purchaser) of any such Acquisition shall not exceed at the time of such
Investment 25% of Consolidated Net Worth as calculated immediately prior to such
Acquisition, (ii) such Acquisitions are undertaken in accordance with all
applicable Requirements of Law; and (iii) the prior, effective written consent
or approval to such Acquisition of the board of directors or equivalent
governing body of the acquiree is obtained;
(e) Investments constituting Permitted Swap
Obligations or payments or advances under Swap Contracts relating
to Permitted Swap Obligations;
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(f) Capital expenditures in connection with lines of
business currently conducted by Company or by the Subsidiary
making the expenditure; and
(g) Secured loans made by the Company to developers to finance
property development when the property is mortgaged to the Company to secure the
loan, the amount of the loan does not exceed the value of the land, the proceeds
of the loan are used for construction of condominium units and related
amenities, and the Company has the right or obligation to purchase the property
from the developer upon completion of construction.
7.05 Transactions with Affiliates. The Company shall not, and shall not
suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of the Company, except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not an Affiliate of the Company or such
Subsidiary.
7.06 Use of Proceeds.
(a) The Company shall not, and shall not suffer or permit any
Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i)
to purchase or carry Margin Stock, (ii) to repay or otherwise refinance
indebtedness of the Company or others incurred to purchase or carry Margin
Stock, (iii) to extend credit for the purpose of purchasing or carrying any
Margin Stock, or (iv) to acquire any security in any transaction that is subject
to Section 13 or 14 of the Exchange Act.
(b) The Company shall not, directly or indirectly, use any
portion of the Loan proceeds (i) knowingly to purchase Ineligible Securities
from the Arranger during any period in which the Arranger makes a market in such
Ineligible Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or privately placed by
the Arranger, or (iii) to make payments of principal or interest on Ineligible
Securities underwritten or privately placed by the Arranger and issued by or for
the benefit of the Company or any Affiliate of the Company. The Arranger is a
registered broker-dealer and permitted to underwrite and deal in certain
Ineligible Securities; and "Ineligible Securities" means securities which may
not be underwritten or dealt in by member banks of the Federal Reserve System
under Section 16 of the Banking Act of 1933 (12 U.S.C. ss. 24, Seventh), as
amended.
7.07 Contingent Obligations. The Company shall not, and
shall not suffer or permit any Subsidiary to, create, incur,
assume or suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
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(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in
Schedule 7.07; and
(d) Contingent Obligations with respect to Surety
Instruments incurred in the ordinary course of business.
7.08 Joint Ventures. The Company shall not, and shall not
suffer or permit any Subsidiary to enter into any Joint Venture,
other than in the ordinary course of business.
7.09 Lease Obligations. The Company shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for:
(a) leases of the Company and of Subsidiaries in
existence on the Closing Date and any renewal, extension or
refinancing thereof;
(b) operating leases entered into by the Company or
any Subsidiary after the Closing Date in the ordinary course of
business;
(c) leases entered into by the Company or any
Subsidiary after the Closing Date pursuant to sale-leaseback
transactions permitted under subsection 7.02(d);
(d) capital leases other than those permitted under clauses (a)
and (c) of this Section, entered into by the Company or any Subsidiary after the
Closing Date to finance the acquisition of equipment; provided that in the case
of a Subsidiary the capital lease is permitted under subsection 7.05(c).
7.10 Restricted Payments. The Company shall not, and shall not suffer or
permit any Subsidiary to, declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock, or purchase, redeem or
otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding; except
that:
(a) the Company may (i) declare and make dividend payments or
other distributions payable solely in its common stock and (ii) purchase, redeem
or otherwise acquire shares of its common stock or warrants or options to
acquire any such shares with the proceeds received from the substantially
concurrent issue of new shares of its common stock; and
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(b) a Wholly-Owned Subsidiary may declare or pay cash
dividends to its stockholders.
7.11 ERISA. The Company shall not, and shall not suffer or permit any of
its ERISA Affiliates to: (a) engage in a prohibited transaction or violation of
the fiduciary responsibility rules with respect to any Plan which has resulted
or could reasonably expected to result in liability of the Company in an
aggregate amount in excess of $1,000,000; or (b) engage in a transaction that
could be subject to Section 4069 or 4212(c) of ERISA.
7.12 Change in Business. The Company shall not, and shall not suffer or
permit any Subsidiary to, engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the date hereof.
7.13 Accounting Changes. The Company shall not, and shall not suffer or
permit any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
the Company or of any Subsidiary.
7.14 Agreements by Subsidiaries. No Subsidiary except TW Holdings, Inc.
shall enter into any agreement that restricts dealings between the Company and
such Subsidiary, including any agreement that prohibits or restricts the ability
of such Subsidiary to pay dividends or to make loans or advances to the Company.
7.15 Notes Receivable. The Company shall not suffer or permit either the
number or amount of Past-Due Notes Receivable to exceed 7.5% of the total number
or amount of Notes Receivable at the close of any calendar month, and shall not
suffer or permit either the number or amount of Delinquent Notes Receivable to
exceed 12% of the total number or amount of Notes Receivable at the close of any
period of two consecutive calendar months. "Notes Receivable" means installment
notes receivable generated by sales of Vacation Credits and secured by an
interest in the related Vacation Credits, the amount of which shall be
calculated net of allowance for doubtful accounts, sales returns, and deferred
gross profit. "Past-Due Notes Receivable" are Notes Receivable more than 30 days
but not more than 90 days past-due. "Delinquent Notes Receivable" are Notes
Receivable more than 90 days past-due.
7.16 Time Share Inventory. The Company shall not suffer or permit the
amount of its inventory at the close of any fiscal quarter, including (i) costs
of unsold Vacation Credits and (ii) construction in progress, to exceed 40% of
aggregate Vacation Credit sales revenues, net of rescissions, reversals, and
cash discounts, for the period of four consecutive fiscal quarters then ended.
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ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall
constitute an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when and as
required to be paid herein, any amount of principal of any Loan, or (ii) within
3 Business Days after the same becomes due, any interest, fee or any other
amount payable hereunder or under any other Loan Document; or
(b) Representation or Warranty. Any representation or warranty
by the Company or any Subsidiary made or deemed made herein, in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement by the Company, any Subsidiary, or any Responsible Officer,
furnished at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. The Company fails to perform
or observe any term, covenant or agreement contained in any of
Section 6.03, 6.13 or 6.14 or in Article VII other than
Section 7.05, 7.12 or 7.13 thereof; or
(d) Other Defaults. The Company [or any Subsidiary party
thereto] fails to perform or observe any other term or covenant contained in
this Agreement or any other Loan Document, [and such default shall continue
unremedied for a period of 20 days after the date upon which written notice
thereof is given to the Company by the Agent or any Bank; or
(e) Cross-Default. (i) The Company or any Subsidiary (A) fails
to make any payment in respect of any Indebtedness or Contingent Obligation
(other than in respect of Swap Contracts), having an aggregate principal amount
(including undrawn committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit arrangement) of more than
$1,000,000 when due (whether by scheduled maturity, required prepayment,
acceleration, demand, or otherwise) and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure; or (B) fails to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation, and such failure continues after the applicable grace or notice
period, if any, specified in the relevant document on the date of such failure
if the effect of such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of such
Indebtedness (or a trustee or agent on
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behalf of such holder or holders or beneficiary or beneficiaries) to cause such
Indebtedness to be declared to be due and payable prior to its stated maturity,
or such Contingent Obligation to become payable or cash collateral in respect
thereof to be demanded; or (ii) there occurs under any Swap Contract an Early
Termination Date (as defined in such Swap Contract) resulting from (1) any event
of default under such Swap Contract as to which the Company or any Subsidiary is
the Defaulting Party (as defined in such Swap Contract) or (2) any Termination
Event (as so defined) as to which the Company or any Subsidiary is an Affected
Party (as so defined), and, in either event, the Swap Termination Value owed by
the Company or such Subsidiary as a result thereof is greater than $5,000,000;
or
(f) Insolvency; Voluntary Proceedings. The Company or any
Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due, subject to
applicable grace periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company or any Subsidiary, or any
writ, judgment, warrant of attachment, execution or similar process, is issued
or levied against a substantial part of the Company's or any Subsidiary's
properties, and any such proceeding or petition shall not be dismissed, or such
writ, judgment, warrant of attachment, execution or similar process shall not be
released, vacated or fully bonded within 60 days after commencement, filing or
levy; (ii) the Company or any Subsidiary admits the material allegations of a
petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Subsidiary acquiesces in the appointment of a receiver,
trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a
Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Company under Title IV of ERISA to the
Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$1,000,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $1,000,000; or (iii) the Company or any ERISA
Affiliate shall fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its withdrawal liability
under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of $1,000,000; or
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(i) Monetary Judgments. One or more non- interlocutory
judgments, non-interlocutory orders, decrees or arbitration awards is entered
against the Company or any Subsidiary involving in the aggregate a liability (to
the extent not covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related series of
transactions, incidents or conditions, of $1,000,000 or more, and the same shall
remain unsatisfied, unvacated and unstayed pending appeal for a period of 30
days after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which does or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(k) Change of Control. There occurs any Change of
Control.
8.02 Remedies. If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, the
Majority Banks,
(a) declare the commitment of each Bank to make Loans
to be terminated, whereupon such commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts owing or
payable hereunder or under any other Loan Document to be immediately due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all
rights and remedies available to it and the Banks under the Loan
Documents or applicable law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 8.01 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation of each Bank
to make Loans shall automatically terminate and the unpaid principal amount of
all outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable without further act of the Agent or any
Bank.
8.03 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not
exclusive of any other rights, powers, privileges or remedies
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provided by law or in equity, or under any other instrument, document or
agreement now existing or hereafter arising.
ARTICLE IX
THE AGENT
9.01 Appointment and Authorization; "Agent". Each Bank hereby
irrevocably (subject to Section 9.09) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
9.02 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.03 Liability of Agent. None of the Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
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any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Bank to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
9.04 Reliance by Agent. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Majority Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Majority Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 4.01, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
9.05 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Agent for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Banks of its receipt of any such
notice. The Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance with Article
VIII; provided, however, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
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Default as it shall deem advisable or in the best interest of the Banks.
9.06 Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and credit worthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company and its Subsidiaries
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and credit worthiness of the Company.
Except for notices, reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have any duty or
responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or credit worthiness of the Company which may come into the possession
of any of the Agent-Related Persons.
9.07 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or
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on behalf of the Company. The undertaking in this Section shall survive the
payment of all Obligations hereunder and the resignation or replacement of the
Agent.
9.08 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though BofA were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of the Majority
Banks shall, resign as Agent upon 30 days' notice to the Banks. If the Agent
resigns under this Agreement, the Majority Banks shall appoint from among the
Banks a successor agent for the Banks which successor agent shall be approved by
the Company. If no successor agent is appointed prior to the effective date of
the resignation of the Agent, the Agent may appoint, after consulting with the
Banks and the Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such successor agent
shall succeed to all the rights, powers and duties of the retiring Agent and the
term "Agent" shall mean such successor agent and the retiring Agent's
appointment, powers and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article IX and
Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is 30 days
following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Agent hereunder until such time, if any, as the
Majority Banks appoint a successor agent as provided for above.
9.10 Withholding Tax. (a) If any Bank is a "foreign
corporation, partnership or trust" within the meaning of the Code
and such Bank claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the
Agent:
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(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Bank, two properly completed and executed copies of IRS Form 4224 before
the payment of any interest is due in the first taxable year of such
Bank and in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) such other form or forms as may be
required under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States withholding
tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Bank sells, assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent will treat such Bank's IRS Form 1001 as no
longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of the
Company to such Bank, such Bank agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. However, if the forms or other documentation required by
subsection (a) of this Section are not delivered to the Agent, then the Agent
may withhold from any interest payment to such Bank not providing such forms or
other documentation an amount equivalent to the applicable withholding tax
imposed by Sections 1441 and 1442 of the Code, without reduction.
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(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) and the Company and acknowledged by the Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by all
the Banks and the Company and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.02);
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Banks (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or (subject to clause (ii) below) any fees or other amounts
payable hereunder or under any other Loan Document;
(d) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Loans which is
required for the Banks or any of them to take any action
hereunder; or
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(e) amend this Section, or Section 2.12, or any
provision herein providing for consent or other action by all
Banks;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
10.02 Notices. (a) All notices, requests, consents, approvals, waivers
and other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number specified on
Schedule 10.02, and (ii) shall be followed promptly by delivery of a hard copy
original thereof) and mailed, faxed or delivered, to the address or facsimile
number specified for notices on Schedule 10.02; or, as directed to the Company
or the Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such
other address as shall be designated by such party in a written notice to the
Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX to the Agent shall not be effective until
actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Company
to give such notice and the Agent and the Banks shall not have any liability to
the Company or other Person on account of any action taken or not taken by the
Agent or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Company to repay the Loans shall not be affected in any way or
to any extent by any failure by the Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the Agent
and the Banks of a confirmation which is at variance with the terms understood
by the Agent and the Banks to be contained in the telephonic or facsimile
notice.
10.03 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Agent or
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any Bank, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse BofA (including in its capacity as Agent) within
five Business Days after demand (subject to subsection 4.01(e)) for all costs
and expenses incurred by BofA (including in its capacity as Agent) in connection
with the development, preparation, delivery, administration and execution of,
and any amendment, supplement, waiver or modification to (in each case, whether
or not consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including reasonable Attorney
Costs incurred by BofA (including in its capacity as Agent) with respect
thereto; and
(b) pay or reimburse the Agent, the Arranger and each Bank
within five Business Days after demand (subject to subsection 4.01(e)) for all
costs and expenses (including Attorney Costs) incurred by them in connection
with the enforcement, attempted enforcement, or preservation of any rights or
remedies under this Agreement or any other Loan Document during the existence of
an Event of Default or after acceleration of the Loans (including in connection
with any "workout" or restructuring regarding the Loans, and including in any
Insolvency Proceeding or appellate proceeding).
10.05 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify, defend and
hold the Agent-Related Persons, and each Bank and each of its respective
officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including at any time following
repayment of the Loans and the termination, resignation or replacement of the
Agent or replacement of any Bank) be imposed on, incurred by or asserted against
any such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, or the transactions contemplated
hereby, or any action taken or omitted by any such Person under or in connection
with any of the foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or appellate
proceeding) related to or arising out of this Agreement or the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a
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party thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
10.06 Payments Set Aside. To the extent that the Company makes a payment
to the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
10.07 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
10.08 Assignments, Participations, etc. (a) Any Bank may, with the
written consent of the Company at all times other than during the existence of
an Event of Default and the Agent, which consents shall not be unreasonably
withheld, at any time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company or the Agent shall be required
in connection with any assignment and delegation by a Bank to an Eligible
Assignee that is an Affiliate of such Bank) (each an "Assignee") all, or any
ratable part of all, of the Loans, the Commitments and the other rights and
obligations of such Bank hereunder, in a minimum amount of $10,000,000;
provided, that the assigning Bank shall either assign all of its Loans and
Commitment or else retain at least $10,000,000 of the amount of its Loans and
Commitment immediately prior to the assignment; and provided further, that the
Company and the Agent may continue to deal solely and directly with such Bank in
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company
and the Agent by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment and Acceptance
in the form of Exhibit E ("Assignment and Acceptance") together with any
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Note or Notes subject to such assignment and (iii) the assignor Bank or Assignee
has paid to the Agent a processing fee in the amount of $4,000.
(b) From and after the date that the Agent notifies the assignor
Bank that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Within five Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment in
accordance with subsection 10.08(a) and that the assigned Loans are evidenced by
Notes), the Company shall execute and deliver to the Agent, new Notes evidencing
such Assignee's assigned Loans and Commitment and, if the assignor Bank has
retained a portion of its Loans and its Commitment, replacement Notes in the
principal amount of the Loans retained by the assignor Bank (such Notes to be in
exchange for, but not in payment of, the Notes held by such Bank). Immediately
upon each Assignee's making its processing fee payment under the Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom. The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning Bank
pro tanto.
(d) Any Bank may at any time sell to one or more commercial
banks or other Persons not Affiliates of the Company (a "Participant")
participating interests in all or any portion of any Loans, the Commitment of
that Bank and the other interests of that Bank (the "originating Bank")
hereunder and under the other Loan Documents; provided, however, that (i) the
originating Bank's obligations under this Agreement shall remain unchanged, (ii)
the originating Bank shall remain solely responsible for the performance of such
obligations, (iii) the Company and the Agent shall continue to deal solely and
directly with the originating Bank in connection with the originating Bank's
rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of
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the Banks as described in the first proviso to Section 10.01. In the case of any
such participation, the Participant shall be entitled to the benefit of Sections
3.01, 3.03 and 10.05 as though it were also a Bank hereunder, and if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any
Bank may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank
may enforce such pledge or security interest in any manner permitted under
applicable law.
10.09 Confidentiality. Each Bank agrees to take and to cause its
Affiliates to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under this Agreement
or any other Loan Document, and neither it nor any of its Affiliates shall use
any such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents or in connection with other business now
or hereafter existing or contemplated with the Company or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality agreement with the
Company known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Bank's independent auditors and other
professional advisors; (G) to any Participant or Assignee, actual or potential,
provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Banks hereunder; (H) as to any
Bank or its Affiliate, as expressly permitted under the terms of any other
document or
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agreement regarding confidentiality to which the Company or any Subsidiary is
party or is deemed party with such Bank or such Affiliate; and (I) to its
Affiliates.
10.10 Set-off. In addition to any rights and remedies of the Banks
provided by law, if an Event of Default exists or the Loans have been
accelerated, each Bank is authorized at any time and from time to time, without
prior notice to the Company, any such notice being waived by the Company to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held by,
and other indebtedness at any time owing by, such Bank or any of its Affiliates
to or for the credit or the account of the Company against any and all
Obligations owing to such Bank, now or hereafter existing, irrespective of
whether or not the Agent or such Bank shall have made demand under this
Agreement or any Loan Document and although such Obligations may be contingent
or unmatured. Each Bank agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Bank; provided, however,
that the failure to give such notice shall not affect the validity of such
set-off and application.
10.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, or other fee, or any other cost or expense (including Attorney
Costs) due and payable to the Agent, BofA or the Arranger under the Loan
Documents, the Company hereby irrevocably authorizes BofA to debit any deposit
account of the Company with BofA in an amount such that the aggregate amount
debited from all such deposit accounts does not exceed such fee or other cost or
expense. If there are insufficient funds in such deposit accounts to cover the
amount of the fee or other cost or expense then due, such debits will be
reversed (in whole or in part, in BofA's sole discretion) and such amount not
debited shall be deemed to be unpaid. No such debit under this Section shall be
deemed a set-off.
10.12 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.14 Severability. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
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legality or enforceability of the remaining provisions of this Agreement or any
instrument or agreement required hereunder.
10.15 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Banks, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
10.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY NOTES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
WASHINGTON; PROVIDED THAT THE AGENT AND THE BANKS SHALL RETAIN ALL RIGHTS
ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT SITTING IN SEATTLE, WASHINGTON AND BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF THE COMPANY, THE AGENT AND THE BANKS IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO.
10.17 Waiver of Jury Trial. THE COMPANY, THE BANKS AND THE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
10.18 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and
understanding among the Company, the Banks and the Agent, and
supersedes all prior or contemporaneous agreements and
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understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
10.19 Statute of Frauds. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Seattle, Washington by their proper and duly
authorized officers as of the day and year first above written.
TRENDWEST RESORTS, INC.
By:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Bank
By:
Title:
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THE FIRST NATIONAL BANK OF CHICAGO
By:
Title:
NATIONSBANK, N.A.
By:
Title:
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SCHEDULE 2.01
COMMITMENTS
AND PRO RATA SHARES
Pro Rata
Bank Commitment Share
Bank of America National
Trust and Savings
Association $10,000,000 33.3%
First National Bank of
Chicago $10,000,000 33.3%
NationsBank, N.A._ $10,000,000 33.3%
----------- -----
TOTAL $30,000,000 100%
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EXHIBIT A
NOTICE OF BORROWING
Date:_________, ____
To: Bank of America National Trust and Savings Association
as Agent for the Banks parties to the Credit Agreement
dated as of February 12, 1998 (as amended, amended and
restated, modified, supplemented, extended or renewed
from time to time, the "Credit Agreement") among
----------------
Trendwest Resorts, Inc., certain Banks which are
signatories thereto, and Bank of America National
Trust and Savings Association, as Agent
Bank of American National Trust and Savings Association,
as Agent
Agency Administrative Services #5596
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520-3281
Attention: Trendwest Resorts AO
Fax: (510) 675-8500
Phone: (510) 675-8431
Ladies and Gentlemen:
The undersigned, Trendwest Resorts, Inc. (the "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of
the Credit Agreement, of the Borrowing specified below:
1. The Business Day of the proposed Borrowing is
, .
2. The aggregate amount of the proposed Borrowing is
$ .
3. The Borrowing is to be comprised of $
of [Base Rate] [Offshore Rate] Loans.
4. The duration of the Interest Period for the
Offshore Rate Loans included in the Borrowing shall be
_____ months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the proposed Borrowing,
before and after giving effect thereto and to the application of the proceeds
therefrom:
(a) the representations and warranties of the Company
contained in Article V of the Credit Agreement are true and
A-1
<PAGE>
correct as though made on and as of such date (except to the extent
such representations and warranties relate to an earlier date, in which
case they are true and correct as of such date);
(b) no Default or Event of Default exists or shall
result from such proposed Borrowing; and
(c) the proposed Borrowing will not cause the aggregate
principal amount of all outstanding Loans to exceed the combined
Commitments of the Banks.
TRENDWEST RESORTS, INC.
By:
Name:
Title:
A-2
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION/CONTINUATION
Date: _______, ___
To: Bank of America National Trust and Savings Association,
as Agent for the Banks parties to the Credit Agreement
dated as of February 12, 1998 (as amended, amended and
restated, modified, supplemented, extended or renewed
from time to time, the "Credit Agreement") among
----------------
Trendwest Resorts, Inc., certain Banks which are
signatories thereto, and Bank of America National Trust
and Savings Association, as Agent
Bank of American National Trust and Savings Association,
as Agent
Agency Administrative Services #5596
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520-3281
Attention: Trendwest Resorts AO
Fax: (510) 675-8500
Phone: (510) 675-8431
Ladies and Gentlemen:
The undersigned, Trendwest Resorts, Inc. (the "Company"), refers to the
Credit Agreement, the terms defined therein being used herein as therein
defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of
the Credit Agreement, of the [conversion] [continuation] of the Loans specified
herein, that:
1. The Conversion/Continuation Date is ,
.
2. The aggregate amount of the Loans to be [converted]
[continued] is $ .
3. The Loans are to be [converted into] [continued as]
[Offshore Rate] [Base Rate] Loans.
4. The duration of the Interest Period for Offshore
Rate Loans included in the [conversion] [continuation] shall
be months.
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the proposed Conversion/Continuation
Date, before and after giving effect thereto and to the application of the
proceeds therefrom:
B-1
<PAGE>
(a) the representations and warranties of the Company
contained in Article V of the Credit Agreement are true and correct as
though made on and as of such date (except to the extent such
representations and warranties relate to an earlier date, in which case
they are true and correct as of such date);
(b) no Default or Event of Default exists or shall
result from such proposed [conversion] [continuation]; and
(c) the proposed [conversion][continuation] will not cause the
aggregate principal amount of all outstanding Loans to exceed the
combined Commitments of the Banks.
TRENDWEST RESORTS, INC.
By:
Name:
Title:
B-2
<PAGE>
EXHIBIT C-1
TRENDWEST RESORTS, INC.
QUARTERLY COMPLIANCE CERTIFICATE
Financial
Statement Date:_____, ____
TO: Bank of America National Trust and Savings Association,
as Agent
Seafirst-Commercial Wholesale Banking
Northwest National Accounts #61101
701 5th Avenue, CSC-12
Seattle, WA 98104
Attention: Stan Diddams, Vice President
and
Credit Products #5771
555 California Street, 41st Floor
San Francisco, CA 94104-1502
Attention: Matthew A. Gabel, Vice President
Reference is made to that certain Credit Agreement dated as of February
12, 1997 (as amended, amended and restated, modified, supplemented, extended or
renewed from time to time, the "Credit Agreement") among Trendwest Resorts,
Inc., an Oregon corporation (the "Company"), the several financial institutions
from time to time parties to the Credit Agreement (the "Banks") and Bank of
America National Trust and Savings Association, as agent for the Banks (in such
capacity, the "Agent"). Unless otherwise defined herein, capitalized terms used
herein have the respective meanings assigned to them in the Credit Agreement.
The undersigned Responsible Officer of Trendwest Resorts, Inc., hereby
certifies as of the date hereof that he/she is the
of the Company, and that, as such, he/she is authorized to
execute and deliver this Certificate to the Banks and the Agent on the behalf of
the Company and its consolidated Subsidiaries, and that:
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by subsection [6.01(a)] of the Credit
Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
audited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of the fiscal year ended _______________, ____ and
(b) the related consolidated statements of income or operations, shareholders'
equity and cash flows for such fiscal year, setting forth in each
C-1-1
<PAGE>
case in comparative form the figures for the previous fiscal year, and
accompanied by the unqualified opinion of KPMG Peat Marwick LLP, or other
nationally-recognized independent public accounting firm, which states that such
consolidated financial statements present fairly the financial position of the
Company and its consolidated Subsidiaries for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years.
or
[Use the following paragraph if this Certificate is delivered in connection with
the financial statements required by subsection [6.01(b)] of the Credit
Agreement.]
1. Attached as Schedule 1 hereto are (a) a true and correct copy of the
unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as of the end of the fiscal quarter ended __________, ____, and (b)
the related unaudited consolidated statements of income, shareholders' equity,
and cash flows for the period commencing on the first day and ending on the last
day of such quarter. Such financial statements were prepared in accordance with
GAAP (subject only to ordinary, good faith year-end audit adjustments and the
absence of footnotes) and present fairly, in all material respects, the
financial position and the results of operations of the Company and its
consolidated Subsidiaries.
2. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of the Company during the accounting period covered by the attached
financial statements.
3. To the best of the undersigned's knowledge, the Company, during such
period, has observed, performed or satisfied all of its covenants and other
agreements, and satisfied every condition in the Credit Agreement to be
observed, performed or satisfied by the Company, and the undersigned has no
knowledge of any Default or Event of Default, including, without limitation
under subsection 8.01(e) of the Credit Agreement.
4. The following financial covenant analyses and information set forth
on Schedule 2 attached hereto are true and accurate on and as of the date of
this Certificate. All amounts and ratios in Schedule 2 refer to the financial
statements attached as Schedule 1 hereto and are determined in accordance with
the specifications set forth in the Credit Agreement.
C-1-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of , .
TRENDWEST RESORTS, INC.
By:
Name:
Title:
C-1-3
<PAGE>
Schedule 2
to
TRENDWEST RESORTS, INC.
QUARTERLY COMPLIANCE CERTIFICATE
Financial Statement Date: _______________
Section 6.13 - Interest Coverage Ratio
Net Income $__________
Plus: Income Tax Provision __________
Plus: Interest Expense __________
Plus: Depreciation __________
Plus: Amortization __________
(a) EBITDA $__________
Divided by:
(b) Interest Expense $__________
(c) (a / b) ___
Minimum Permitted 6.0
Section 6.14 - Capitalization Ratio
Notes Payable $__________
Plus: Capital Lease Obligations __________
(a) Consolidated Indebtedness $__________
Divided by:
(b) Shareholders' equity $__________
(c) (a / b) ___%
Maximum Permitted 50%
C-1-4
<PAGE>
Section 7.16 - Time Share Inventory
Unsold Vacation Credits $__________
Plus: Construction in progress __________
(a) Total Inventory $__________
Divided by:
(b) Prior four (4) quarter Vacation Credit sales,
revenues, net $__________
(c) (a / b) ___%
Maximum Permitted 40%
Section 7.01 - Limitation on Liens
(a) Total Secured Debt $__________
(b) Consolidated Net Worth $__________
(c) (a / b) ___%
Maximum Permitted 5%
C-1-5
<PAGE>
EXHIBIT C-2
TRENDWEST RESORTS, INC.
MONTHLY COMPLIANCE CERTIFICATE
Calendar Month Ending: _________,_______
TO: Bank of America National Trust and Savings Association,
as Agent
Seafirst-Commercial Wholesale Banking
Northwest National Accounts #61101
701 5th Avenue, CSC-12
Seattle, WA 98104
Attention: Stan Diddams, Vice President
and
Credit Products #5771
555 California Street, 41st Floor
San Francisco, CA 94104-1502
Attention: Matthew A. Gabel, Vice President
Reference is made to that certain Credit Agreement dated as of February
12, 1998 (as amended, amended and restated, modified, supplemented, extended or
renewed from time to time, the "Credit Agreement") among Trendwest Resorts,
Inc., an Oregon corporation (the "Company"), the several financial institutions
from time to time parties to the Credit Agreement (the "Banks") and Bank of
America National Trust and Savings Association, as agent for the Banks (in such
capacity, the "Agent"). Unless otherwise defined herein, capitalized terms used
herein have the respective meanings assigned to them in the Credit Agreement.
The undersigned Responsible Officer of Trendwest Resorts, Inc., hereby
certifies as of the date hereof that he/she is the ____________________ of the
Company, and that, as such, he/she is authorized to execute and deliver this
Certificate to the Banks and the Agent on the behalf of the Company and its
consolidated Subsidiaries, and that:
1. The undersigned has reviewed and is familiar with the terms of the
Credit Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and conditions (financial or
otherwise) of the Company during the calendar month ended __________, _____.
2. To the best of the undersigned's knowledge, the
Company, during such period, has observed, performed or satisfied
all of its covenants and other agreements, and satisfied every
condition in the Credit Agreement to be observed, performed or
C-2-1
<PAGE>
satisfied by the Company, and the undersigned has no knowledge of any Default or
Event of Default, including, without limitation under subsection 8.01(e) of the
Credit Agreement.
3. The following financial covenant analyses and information set forth
on Schedule 1 attached hereto are true and accurate on and as of the date of
this Certificate.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of , .
TRENDWEST RESORTS, INC.
By:
Name:
Title:
C-2-2
<PAGE>
Schedule 1
to
TRENDWEST RESORTS, INC.
MONTHLY COMPLIANCE CERTIFICATE
Month Ended: _______________
Section 7.15 Notes Receivable Past Due and Delinquent
1 2
Balances
# of Loans Outstanding
(a) __________ $__________
Outstanding Past Due Amount
(b) 31 - 90 Days __________ $__________
(c) b / a __________ $__________
Maximum Permitted: 7.5% 7.5%
Outstanding Delinquent Amount
(d) >91 days __________ $__________
(e) d / a __________ $__________
Maximum Permitted for any two
(2) Consecutive Months: 12% 12%
C-2-3
<PAGE>
Section 4.02(d) - Borrowing Base Availability Calculation
Notes Receivable $__________
Less: Allowance for doubtful accounts, __________
Less: Allowance for sales returns, __________
Less: Residual interest in notes receivable sold __________
(a) Unencumbered Notes Receivable $__________
(b) NR Advance Rate 75%
(c) Notes Receivable available for Advances
(a x b) $__________
Unsold Vacation Credits $__________
Construction in Progress __________
(Lower of Cost or Net Realizable Value) __________
(d) Total Inventory $__________
(e) Inventory Advance Rate 50%
(f) Inventory available for Advances
d x e $__________
Total Available Funds (< $30,000,000)
c + f $__________
C-2-4
<PAGE>
EXHIBIT D-1
FORM OF OPINION OF COMPANY'S WASHINGTON COUNSEL
[on letterhead of Trendwest Resorts, Inc.]
February ___, 1998
Bank of America National Trust and Savings Association as agent under the Credit
Agreement (as hereinafter defined)
555 California Street, 41st Floor
San Francisco, California
Ladies and Gentlemen:
I have acted as Washington counsel to Trendwest Resorts, Inc. an Oregon
corporation (the "Corporation"), in connection with the transaction contemplated
by the Credit Agreement dated as of February 12, 1998, (the "Credit Agreement")
between the Corporation, you, and the other financial institutions party
thereto. This opinion letter is provided to you at the request of the
Corporation pursuant to Section 4.01(d) of the Credit Agreement. Except as
otherwise indicated herein, capitalized terms used in this opinion letter are
defined as set forth in the Credit Agreement.
I have examined the originals or copies of such documents, certificates
and records as I have deemed relevant or necessary as the basis for the opinions
hereinafter expressed. I have assumed the genuineness of all signatures, the
authenticity of documents, certificates and records submitted to me as
originals, the conformity to the originals of all documents, certificates and
records submitted to me as certified or reproduction copies, the legal capacity
of all natural persons executing documents, certificates and records, and the
completeness and accuracy as of the date of this opinion letter of the
information contained in such documents, certificates and records.
This opinion letter is subject to all assumptions, qualifications and
limitations not inconsistent herewith that are described in the Legal Opinion
Accord of the ABA Section of Business Law (1991) at Section 4 ("Reliance by
Opinion Giver on Assumptions"), Section 14 ("Other Common Qualifications"),
D-1-1
<PAGE>
Bank of America National Trust
and Savings Association
Page 2
Section 16 ("No Violation of Law") and Section 19 ("Specific
Legal Issues").
The law covered by opinions expressed herein is limited to the Federal
law of the United States and the law of the State of Washington. I express no
opinion with respect to the laws, regulations or ordinances of any county,
municipality or other local governmental agency.
As used in this opinion letter, the expression "to my knowledge" or
expressions of like import means my conscious awareness of facts or other
information and does not include information that might be revealed if there
were to be undertaken a canvass of all offices of the Corporation or a review of
all of its files. Except as otherwise set forth herein, I have not reviewed any
agreements, orders, writs, judgments or decrees.
For purposes of this opinion letter I also assume that: the Corporation
is duly incorporated and validly existing under the laws of the State of Oregon;
the Corporation has corporate power and authority to enter into and perform the
Credit Agreement; and the execution, delivery and performance of the Credit
Agreement have been duly authorized by all necessary corporate action on the
part of the Corporation.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Corporation has received a certificate of authority
to transact business as a foreign corporation in the States of
Washington, ___________________, ________________________, and
- -----------------------.
2. The Credit Agreement has been duly executed and delivered by the
Corporation and constitutes the valid and binding obligation of the Corporation
enforceable against the Corporation in accordance with its terms, except:
(a) The enforceability thereof may be affected by bankruptcy,
insolvency, moratorium, fraudulent transfer and other similar laws affecting the
rights and remedies of creditors generally and by the effect of general
principles of equity, including without limitation, equitable defenses and
concepts of materiality, reasonableness, unconscionability, impracticability,
impossibility, good faith and fair dealing, and the possible
D-1-2
<PAGE>
Bank of America National Trust
and Savings Association
Page 3
unavailability of specific performance or injunctive relief,
whether applied in an action at law or in equity;
(b) The courts of the State of Washington will consider extrinsic
evidence of circumstances surrounding the making of the Credit Agreement to
ascertain the intent of the parties in using the language employed therein, even
when such language is unambiguous, and may incorporate additional or
supplementary terms into the Credit Agreement in order to effectuate the intent
of the parties; and
(c) While certain provisions of the Credit Agreement may be
unenforceable, such unenforceability will not in our opinion render the Credit
Agreement invalid as a whole or preclude (i) judicial enforcement of the
obligation of the Corporation to repay the indebtedness evidenced by the Credit
Agreement, together with interest thereon (to the extent not deemed a penalty)
or (ii) acceleration of the obligation of the Corporation to repay such
indebtedness upon material default by the Corporation in payment of the
principal of or interest on such indebtedness or upon material default in any
other material provision of the Credit Agreement (to the extent the Credit
Agreement provides for such acceleration).
3. Execution and delivery by the Corporation of, and performance of its
agreements in, the Agreement do not (i) breach or result in a default under any
existing material obligation of the Corporation under any indenture, mortgage,
contract or other agreement to which the Corporation is a party and of which I
have knowledge, or (ii) breach or otherwise violate any existing material
obligation of the Corporation under any court or administrative order, writ,
judgment or decree of which I have knowledge that names the corporation and is
specifically directed to it or its property
4. Execution, delivery and performance by the Corporation
of the Agreement do not violate applicable provisions of
statutory law or regulations.
5. No authorization, consent or approval of, filing with, or other
action by, any governmental authority is required for the execution and delivery
of the Credit Agreement by the Corporation or the repayment of the Loans by the
Corporation.
D-1-3
<PAGE>
Bank of America National Trust
and Savings Association
Page 4
6. I confirm to you that, to my knowledge, there are no actions or
proceedings against the Corporation, pending or overtly threatened in writing,
before any court, governmental agency or arbitrator which (i) seek to impair the
enforceability of the Credit Agreement or (ii) except as disclosed in Schedule
5.05 to the Credit Agreement, if determined adversely to the Corporation, would
result in a judgment or order against the Corporation (in excess of insurance
coverage) for more than $500,000 in any one case or $1,000,000 in the aggregate.
This opinion letter is delivered as of its date and without any
undertaking to advise you of any changes of law or fact that occur after the
date of this opinion letter even though the changes may affect a legal analysis
or conclusion or an information confirmation in this opinion letter.
A copy of this opinion letter may be delivered by you to each Bank, and
they may rely on this opinion letter as if it were addressed and had been
delivered to them on the date hereof. Subject to the foregoing, this opinion
letter may be relied upon by you only in connection with the transaction
described in the initial paragraph of this opinion letter and may not be used or
relied upon by you for any other purpose or by any other person for any purpose
whatsoever without, in each instance, my prior written consent.
Very truly yours,
ROBERT KLEIN
D-1-4
<PAGE>
EXHIBIT D-2
FORM OF OPINION OF COMPANY'S OREGON COUNSEL
[on letterhead of Jeld-Wen, inc.]
February ___, 1998
Bank of America National Trust and Savings Association as agent under the Credit
Agreement (as hereinafter defined)
555 California Street, 41st Floor
San Francisco, California
Ladies and Gentlemen:
I have acted as Oregon counsel to Trendwest Resorts, Inc. an Oregon
corporation (the "Corporation") and a subsidiary of Jeld-Wen, inc., in
connection with the transaction contemplated by the Credit Agreement dated as of
February 12, 1998 (the "Credit Agreement") between the Corporation, you, and the
other financial institutions party thereto. This opinion letter is provided to
you at the request of the Corporation pursuant to Section 4.01(d) of the Credit
Agreement. Except as otherwise indicated herein, capitalized terms used in this
opinion letter are defined as set forth in the Credit Agreement.
I have examined the originals or copies of such documents, certificates
and records as I have deemed relevant or necessary as the basis for the opinions
hereinafter expressed. I have assumed the genuineness of all signatures, the
authenticity of documents, certificates and records submitted to me as
originals, the conformity to the originals of all documents, certificates and
records submitted to me as certified or reproduction copies, the legal capacity
of all natural persons executing documents, certificates and records, and the
completeness and accuracy as of the date of this opinion letter of the
information contained in such documents, certificates and records.
This opinion letter is subject to all assumptions, qualifications and
limitations not inconsistent herewith that are described in the Legal Opinion
Accord of the ABA Section of Business Law (1991) at Section 4 ("Reliance by
Opinion Giver on
D-2-1
<PAGE>
Bank of America National Trust
and Savings Association
Page 2
Assumptions"), Section 16 ("No Violation of Law") and Section 19 ("Specific
Legal Issues").
The law covered by opinions expressed herein is limited to the Federal
law of the United States and the law of the State of Oregon. I express no
opinion with respect to the laws, regulations or ordinances of any county,
municipality or other local governmental agency.
As used in this opinion letter, the expression "to my knowledge" or
expressions of like import means my conscious awareness of facts or other
information and does not include information that might be revealed if there
were to be undertaken a canvass of all offices of the Corporation or a review of
all of its files. Except as otherwise set forth herein, I have not reviewed any
agreements, orders, writs, judgments or decrees.
Based upon and subject to the foregoing, I am of the opinion that:
1. The Corporation is a corporation duly incorporated and validly
existing under the laws of the State of Oregon and has the corporate power and
corporate authority to own and operate its properties and assets and, to our
knowledge, to engage in the business that it now carries on.
2. The Corporation has corporate power and authority to enter into and
perform the Agreement. The execution, delivery and performance of the Agreement
have been duly authorized by all necessary corporate action on the part of the
Corporation, and the Agreement has been duly executed and delivered by the
Corporation.
3. Execution and delivery by the Corporation of, and performance of its
agreements in, the Agreement do not (i) violate the Corporation's articles of
incorporation or bylaws, (ii) breach or result in a default under any existing
material obligation of the Corporation under any indenture, mortgage, contract
or other agreement to which the Corporation is a party and of which I have
knowledge, or (iii) breach or otherwise violate any existing material obligation
of the Corporation under any court or administrative order, writ, judgment or
decree of which I have knowledge that names the corporation and is specifically
directed to it or its property
D-2-2
<PAGE>
Bank of America National Trust
and Savings Association
Page 3
4. Execution, delivery and performance by the Corporation
of the Agreement do not violate applicable provisions of
statutory law or regulations.
5. No authorization, consent or approval of, filing with, or other
action by, any governmental authority is required for the execution and delivery
of the Credit Agreement by the Corporation or the repayment of the Loans by the
Corporation.
6. I confirm to you that, to my knowledge, there are no actions or
proceedings against the Corporation, pending or overtly threatened in writing,
before any court, governmental agency or arbitrator which (i) seek to impair the
enforceability of the Credit Agreement or (ii) except as disclosed in Schedule
5.05 to the Credit Agreement, if determined adversely to the Corporation, would
result in a judgment or order against the Corporation (in excess of insurance
coverage) for more than $500,000 in any one case or $1,000,000 in the aggregate.
This opinion letter is delivered as of its date and without any
undertaking to advise you of any changes of law or fact that occur after the
date of this opinion letter even though the changes may affect a legal analysis
or conclusion or an information confirmation in this opinion letter.
A copy of this opinion letter may be delivered by you to each Bank, and
they may rely on this opinion letter as if it were addressed and had been
delivered to them on the date hereof. Subject to the foregoing, this opinion
letter may be relied upon by you only in connection with the transaction
described in the initial paragraph of this opinion letter and may not be used or
relied upon by you for any other purpose or by any other person for any purpose
whatsoever without, in each instance, my prior written consent.
Very truly yours,
HEIDI NEEL
D-2-3
<PAGE>
EXHIBIT E
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of __________, _____ is made between
______________________________ (the "Assignor") and
__________________________ (the "Assignee").
RECITALS
WHEREAS, the Assignor is party to that certain Credit Agreement dated
as of February 12, 1998 (as amended, amended and restated, modified,
supplemented, extended or renewed from time to time, the "Credit Agreement")
among Trendwest Resorts, Inc., an Oregon corporation (the "Company"), the
several financial institutions from time to time party thereto (including the
Assignor, the "Banks"), and Bank of America National Trust and Savings
Association, as agent for the Banks (the "Agent"). Any terms defined in the
Credit Agreement and not defined in this Assignment and Acceptance are used
herein as defined in the Credit Agreement;
WHEREAS, as provided under the Credit Agreement, the Assignor has
committed to making Loans (the "Committed Loans") to the Company in an aggregate
amount not to exceed $__________ (the "Commitment");
WHEREAS, [the Assignor has made Committed Loans in the aggregate
principal amount of $__________ to the Company] [no Committed Loans are
outstanding under the Credit Agreement];
WHEREAS, the Assignor wishes to assign to the Assignee [part of the]
[all] rights and obligations of the Assignor under the Credit Agreement in
respect of its Commitment, [together with a corresponding portion of each of its
outstanding Committed Loans,] in an amount equal to $__________ (the "Assigned
Amount") on the terms and subject to the conditions set forth herein and the
Assignee wishes to accept assignment of such rights and to assume such
obligations from the Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, (i) the Assignor hereby sells, transfers and assigns to the
Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from
the Assignor,
E-1
<PAGE>
without recourse and without representation or warranty (except as provided in
this Assignment and Acceptance) __% (the "Assignee's Percentage Share") of (A)
the Commitment [and the Committed Loans] of the Assignor and (B) all related
rights, benefits, obligations, liabilities and indemnities of the Assignor under
and in connection with the Credit Agreement and the Loan Documents.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), the Assignee shall be a party to the Credit Agreement and
succeed to all of the rights and be obligated to perform all of the obligations
of a Bank under the Credit Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Amount. The Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank. It is the intent
of the parties hereto that the Commitment of the Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Amount and the
Assignor shall relinquish its rights and be released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee; provided, however, the Assignor shall not relinquish its indemnity
rights under the Loan Documents (including rights arising under Article III and
Sections 10.04 and 10.05 of the Credit Agreement) to the extent such rights
relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and
assumption set forth herein, on the Effective Date the Assignee's
Commitment will be $__________.
(d) After giving effect to the assignment and
assumption set forth herein, on the Effective Date the Assignor's
Commitment will be $__________.
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the
Effective Date in immediately available funds an amount equal to $__________,
representing the Assignee's Pro Rata Share of the principal amount of all
Committed Loans. [Add, if applicable, payment of accrued interest on, and fees
with respect to, Committed Loans assigned.]
(b) The [Assignor] [Assignee] further agrees to pay to
the Agent a processing fee in the amount specified in
subsection 10.08(a) of the Credit Agreement.
E-2
<PAGE>
3. Reallocation of Payments.
Any interest, fees and other payments accrued to the Effective Date
with respect to the Commitment[,] [and Committed Loans] shall be for the account
of the Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Amount shall be for the account of
the Assignee. Each of the Assignor and the Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision.
The Assignee (a) acknowledges that it has received a copy of the Credit
Agreement and the Schedules and Exhibits thereto, together with copies of the
most recent financial statements referred to in Section 6.01 of the Credit
Agreement, and such other documents and information as it has deemed appropriate
to make its own credit and legal analysis and decision to enter into this
Assignment and Acceptance; and (b) agrees that it will, independently and
without reliance upon the Assignor, the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit and legal decisions in taking or not taking
action under the Credit Agreement.
5. Effective Date; Notices.
(a) As between the Assignor and the Assignee, the effective
date for this Assignment and Acceptance shall be __________, _____ (the
"Effective Date"); provided that the following conditions precedent have been
satisfied on or before the Effective Date:
(i) this Assignment and Acceptance shall be
executed and delivered by the Assignor and the Assignee;
(ii) the consent of the Company and the Agent
required for an effective assignment of the Assigned Amount by the Assignor to
the Assignee under subsection 10.08(a) of the Credit Agreement shall have been
duly obtained and shall be in full force and effect as of the Effective Date;
(iii) the Assignee shall pay to the Assignor all
amounts due to the Assignor under this Assignment and Acceptance;
(iv) the Assignee shall have complied with
subsection 9.10(a) of the Credit Agreement (if applicable); and
(v) the processing fee referred to in
Section 2(b) hereof shall have been paid to the Agent.
E-3
<PAGE>
(b) Promptly following the execution of this Assignment and
Acceptance, the Assignor shall deliver to the Company, and the Agent for
acknowledgement by the Agent, a Notice of Assignment substantially in the form
attached hereto as Schedule 1.
6. Agent.
(a) The Assignee hereby appoints and authorizes the Assignor
to take such action as agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Agent by the Banks pursuant to the
terms of the Credit Agreement.
[(b) The Assignee shall assume no duties or obligations held
by the Assignor in its capacity as Agent under the Credit Agreement.] [INCLUDE
ONLY IF ASSIGNOR IS AGENT]
7. Withholding Tax.
The Assignee (a) represents and warrants to the Assignor, the Agent and
the Company that under applicable law and treaties no tax will be required to be
withheld by the Assignor with respect to any payments to be made to the Assignee
hereunder, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to the Agent and
the Company prior to the time that the Agent or Company is required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a
tax treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by the Assignee, and (c) agrees to comply
with all applicable U.S. laws and regulations with regard to such withholding
tax exemption.
8. Representations and Warranties.
(a) The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any Lien or other adverse claim; (ii) it
is duly organized and existing and it has the full power and authority to take,
and has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder; (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and
E-4
<PAGE>
performance of this Assignment and Acceptance, and apart from any agreements or
undertakings or filings required by the Credit Agreement, no further action by,
or notice to, or filing with, any Person is required of it for such execution,
delivery or performance; and (iv) this Assignment and Acceptance has been duly
executed and delivered by it and constitutes the legal, valid and binding
obligation of the Assignor, enforceable against the Assignor in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors' rights and to general equitable principles.
(b) The Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto. The Assignor makes no representation or warranty in connection with,
and assumes no responsibility with respect to, the solvency, financial condition
or statements of the Company, or the performance or observance by the Company,
of any of its respective obligations under the Credit Agreement or any other
instrument or document furnished in connection therewith.
(c) The Assignee represents and warrants that (i) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance, and to
fulfill its obligations hereunder; (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Assignment and Acceptance; and apart from any agreements or undertakings or
filings required by the Credit Agreement, no further action by, or notice to, or
filing with, any Person is required of it for such execution, delivery or
performance; (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against the Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles; and (iv) it is an
Eligible Assignee.
9. Further Assurances.
The Assignor and the Assignee each hereby agree to execute and deliver
such other instruments, and take such other action, as either party may
reasonably request in connection with the
E-5
<PAGE>
transactions contemplated by this Assignment and Acceptance, including the
delivery of any notices or other documents or instruments to the Company or the
Agent, which may be required in connection with the assignment and assumption
contemplated hereby.
10. Miscellaneous.
(a) Any amendment or waiver of any provision of this
Assignment and Acceptance shall be in writing and signed by the parties hereto.
No failure or delay by either party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof and any waiver of any
breach of the provisions of this Assignment and Acceptance shall be without
prejudice to any rights with respect to any other or further breach thereof.
(b) All payments made hereunder shall be made
without any set-off or counterclaim.
(c) The Assignor and the Assignee shall each pay its own costs
and expenses incurred in connection with the negotiation, preparation, execution
and performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any
number of counterparts and all of such counterparts taken together shall be
deemed to constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF WASHINGTON. The Assignor
and the Assignee each irrevocably submits to the non-exclusive jurisdiction of
any State or Federal court sitting in Washington over any suit, action or
proceeding arising out of or relating to this Assignment and Acceptance and
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such Washington State or Federal court. Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.
(f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).
[Other provisions to be added as may be negotiated between the
Assignor and the Assignee, provided that such provisions are not inconsistent
with the Credit Agreement.]
E-6
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By:
Name:
Title:
[ASSIGNEE]
By:
Name:
Title:
E-7
<PAGE>
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
---------------, -----
Bank of America National Trust and Savings Association,
as Agent
1850 Gateway Boulevard, 5th Floor
Concord, CA 94520-3281
Attn: Agency Administrative Services #5596
Re: Trendwest Resorts
Bank of America National Trust and Savings Association,
as Agent
Credit Products #5771
555 California Street, 41st Floor
San Francisco, CA 94104-1502
Attention: Matthew A. Gabel, Vice President
Trendwest Resorts, Inc.
12301 N.E. 10th Place
Bellevue, WA 98005
Attn: Gary A. Florence
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of February 12, 1998 (as
amended, amended and restated, modified, supplemented, extended or renewed from
time to time, the "Credit Agreement") among Trendwest Resorts, Inc. (the
"Company"), the Banks referred to therein, and Bank of America National Trust
and Savings Association as agent for the Banks (the "Agent"). Terms defined in
the Credit Agreement are used herein as therein defined.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________ (the "Assignor")1 to _______________ (the
"Assignee") of _____% of the right, title and interest of the Assignor in and to
the Credit Agreement (including, without limitation, the right, title and
interest of the Assignor in and to the Commitments of the Assignor[,] [and] all
outstanding Loans made by the Assignor) pursuant to the Assignment and
Acceptance Agreement attached hereto (the "Assignment and Acceptance"). Before
giving effect to such assignment the Assignor's Commitment is $ ___________[,]
[and the aggregate amount of its outstanding Loans is $_____________].
- --------
1 See Section 10.08 of Credit Agreement regarding
circumstances under which Company consent is or is not
required.
E-8
<PAGE>
2. The Assignee agrees that, upon receiving the consent of the
Agent and, if applicable, the Company, to such assignment, the Assignee will be
bound by the terms of the Credit Agreement as fully and to the same extent as if
the Assignee were the Bank originally holding such interest in the Credit
Agreement.
3. The following administrative details apply to the
Assignee:
(A) Notice Address:
Assignee name: __________________________
Address: _______________________________
-------------------------------
Attention: _____________________________
Telephone: (___) _______________________
Telecopier: (___) ______________________
Telex (Answerback): ____________________
(B) Payment Instructions:
Account No.: ___________________________
At: ___________________________
---------------------------
---------------------------
Reference: ___________________________
Attention: ___________________________
4. You are entitled to rely upon the representations, warranties
and covenants of each of the Assignor and Assignee contained in the Assignment
and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Notice of Assignment and Acceptance to be executed by their respective duly
authorized officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:
Name:
Title:
By:
Name:
Title:
1424\80\00006.AGM/2.5.98
Seattle
E-9
<PAGE>
[NAME OF ASSIGNEE]
By:
Name:
Title:
By:
Name:
Title:
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
TRENDWEST RESORTS, INC.
By:
Name:
Title:
By:
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By:
Name:
Title:
E-10
<PAGE>
EXHIBIT F
FORM OF PROMISSORY NOTE
[Seattle, WA]
$----------------- ------------, -----
FOR VALUE RECEIVED, the undersigned, Trendwest Resorts, Inc., an Oregon
corporation (the "Company"), hereby promises to pay to the order of (the "Bank")
the principal sum of Dollars ($ ) or, if less, the aggregate unpaid principal
amount of all Loans made by the Bank to the Company pursuant to the Credit
Agreement dated as of February 12, 1998 (as amended, amended and restated,
modified, supplemented, extended or renewed from time to time, the "Credit
Agreement") among the Company, the Bank, the other banks parties thereto, and
Bank of America National Trust and Savings Association as Agent for the Banks,
on the dates and in the amounts provided in the Credit Agreement. The Company
further promises to pay interest on the unpaid principal amount of the Loans
evidenced hereby from time to time at the rates, on the dates, and otherwise as
provided in the Credit Agreement.
The Bank is authorized to endorse the amount and the date on which each
Loan is made, the maturity date therefor and each payment of principal with
respect thereto on the schedules annexed hereto and made a part hereof, or on
continuations thereof which shall be attached hereto and made a part hereof;
provided, that any failure to endorse such information on such schedule or
continuation thereof shall not in any manner affect any obligation of the
Company under the Credit Agreement and this Promissory Note (the "Note").
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Credit Agreement, which Credit Agreement, among other things,
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
Terms defined in the Credit Agreement are used herein with their
defined meanings therein unless otherwise defined herein. This Note shall be
governed by, and construed and interpreted in
Seattle
F-1
<PAGE>
accordance with, the laws of the State of Washington applicable to contracts
made and to be performed entirely within such State.
TRENDWEST RESORTS, INC.
By:
Name:
Title:
F-2
<PAGE>
Schedule A to Note
BASE RATE LOANS AND REPAYMENT OF BASE RATE LOANS
(2) (3) (4)
Amount Maturity Amount of
of Date of Base (5)
(1) Base Base Rate Loan Notation
Date Rate Loan Rate Loan Repaid Made By
F-3
<PAGE>
Schedule B to Note
OFFSHORE RATE LOANS AND REPAYMENT OF OFFSHORE RATE LOANS
(2) (3) (4)
Amount Maturity Amount of
of Date of Offshore (5)
(1) Offshore Offshore Rate Loan Notation
Date Rate Loan Rate Loan Repaid Made By
F-4
<PAGE>
Exhibit 11
Statement re Computation of Basic and Diluted Net Income per Common Share
Basic and diluted net income per common share is calculated as follows:
<TABLE>
<CAPTION>
Three months ended March 31, 1997: Number of Weighted
Date shares Average
---------------------------------------------
<S> <C> <C> <C>
Shares outstanding 1/1/97 (1) 1/1/97 14,417,116 14,417,116
---------------------------------------------
Weighted average shares outstanding for the period 14,417,116
Net income for the period (thousands) $ 3,999
=================
Basic and diluted net income per common share (2) $ .28
=================
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31, 1998: Number of Weighted
Date shares Average
-------------------------------------------
<S> <C> <C> <C>
Shares outstanding 1/1/98 1/1/98 17,593,366 17,593,366
-------------------------------------------
Weighted average shares outstanding for the period 17,593,366
Net income for the period (thousands) $ 5,864
=================
Basic and diluted net income per common share (2) $ 0.33
=================
</TABLE>
(1) Assuming 5,193,693 shares issued in conjunction with the consolidation
transaction described in Note 2 to the condensed combined and consolidated
financial statements had been outstanding for all periods presented.
(2)There are no dilutive securities outstanding for the periods presented
resulting in basic and diluted earnings per share being equal.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMBINED
AND CONSOLIDATED FINANCIAL STATEMENTS OF TRENDWEST RESORTS, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JAN-30-1998
<CASH> 5,953
<SECURITIES> 0
<RECEIVABLES> 68,838
<ALLOWANCES> 9,899
<INVENTORY> 47,469
<CURRENT-ASSETS> 0
<PP&E> 10,067
<DEPRECIATION> 2,106
<TOTAL-ASSETS> 152,293
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 66,742
<OTHER-SE> 61,247
<TOTAL-LIABILITY-AND-EQUITY> 152,293
<SALES> 34,885
<TOTAL-REVENUES> 42,828
<CGS> 9,513
<TOTAL-COSTS> 9,789
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,396
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 9,183
<INCOME-TAX> 3,319
<INCOME-CONTINUING> 5,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,864
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
