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 September 30, 1999
[ ] 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)
9805 Willows Road
Redmond, Washington 98052
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (425) 498-2500
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 November 12, 1999: 17,128,721 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1999 1998
----------------- ----------------
(Unaudited)
<S> <C> <C>
Assets:
Cash $ 35 9
Restricted cash 4,219 2,351
Notes Receivable, net of allowance for doubtful accounts, sales
returns and deferred gross profit 79,624 93,361
Accrued interest and other receivables 10,955 11,399
Residual interest in Notes Receivable sold 36,339 23,683
Receivable from Parent 1,660 --
Inventories 41,215 42,309
Property and equipment, net 20,396 20,343
Deferred income taxes -- 702
Other assets 6,592 4,341
----------------- ----------------
Total assets $ 201,035 198,498
================= ================
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 2,802 1,436
Accrued liabilities 13,490 6,645
Accrued construction in progress 837 1,064
Borrowing under bank line of credit 2,000 30,000
Due to Parent -- 5,688
Allowance for recourse liability and deferred gross profit on Notes
Receivable sold 13,775 11,250
Deferred income taxes 867 --
Income taxes payable 53 1,153
----------------- ----------------
Total liabilities 33,824 57,236
Shareholders' 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 17,128,721 and 17,158,766 shares at September
30, 1999, and December 31, 1998, respectively. 61,279 61,848
Retained earnings 105,932 79,414
----------------- ----------------
Total shareholders' equity 167,211 141,262
Commitments and contingencies
----------------- ----------------
Total liabilities and shareholders' equity $ 201,035 198,498
================= ================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------------- -----------------------------------
1999 1998 1999 1998
---------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Vacation Credit and Fractional Interest sales, net $ 62,951 46,530 175,393 123,403
Finance income 3,649 3,368 10,938 9,628
Gains on sales of Notes Receivable 3,857 1,828 13,000 7,003
Resort management services 573 521 2,348 1,517
Other 964 946 3,514 2,459
---------------- ----------------- ---------------- ----------------
Total revenues 71,994 53,193 205,193 144,010
---------------- ----------------- ---------------- ----------------
Costs and operating expenses:
Vacation Credit and Fractional Interest cost of
sales 18,076 13,438 52,179 34,119
Resort management services 438 347 1,256 946
Sales and marketing 27,814 22,346 77,976 61,003
General and administrative 6,664 4,246 17,909 12,312
Provision for doubtful accounts and recourse
liability 4,414 3,220 12,234 8,535
Interest 16 204 125 242
---------------- ----------------- ---------------- ----------------
Total costs and operating expenses 57,422 43,801 161,679 117,157
---------------- ----------------- ---------------- ----------------
Income before income taxes 14,572 9,392 43,514 26,853
Income tax expense 5,708 3,508 16,996 9,941
---------------- ----------------- ---------------- ----------------
Net income $ 8,864 5,884 26,518 16,912
================ ================= ================ ================
Basic net income per common share $ .52 .34 1.55 .97
Diluted net income per common share .52 .34 1.54 .97
Weighted average shares of common stock and dilutive
potential common stock outstanding:
Basic 17,128,830 17,308,564 17,142,331 17,498,086
Diluted 17,192,251 17,308,564 17,189,894 17,498,086
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,518 16,912
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization 1,212 769
Gain on sale of property and equipment (870) --
Amortization of residual interest in Notes Receivable sold 7,919 4,882
Provision for doubtful accounts, sales returns and recourse
liability 16,166 11,114
Recoveries of Notes Receivable charged off 176 159
Residual interest in Notes Receivables sold (17,994) (7,993)
Unrealized loss (gain) on residual interest in Notes Receivable
sold 973 (534)
Contract servicing liability arising from sale of Notes Receivable 2,847 --
Amortization of contract servicing liability (129) --
Change in deferred gross profit 27 (884)
Deferred income tax expense (benefit) 1,569 (236)
Issuance of Notes Receivable (152,773) (107,651)
Proceeds from sale of Notes Receivable 114,892 72,152
Proceeds from repayment of Notes Receivable 40,487 23,302
Purchase of Notes Receivable (6,267) (18,402)
Changes in certain assets and liabilities:
Restricted cash (1,868) (1,286)
Inventories 1,094 4,474
Accounts payable and accrued liabilities 3,657 (5,245)
Income taxes payable to Parent -- (2,755)
Income taxes payable (1,100) (280)
Other (1,905) (2,538)
------------------- -------------------
Net cash provided by (used in) operating activities 34,631 (14,040)
------------------- -------------------
Cash flows from investing activities:
Purchase of property and equipment (4,709) (6,193)
Proceeds from sale of property and equipment 4,412 --
------------------- -------------------
Net cash used in investing activities (297) (6,193)
------------------- -------------------
Cash flows from financing activities:
Net (repayment) borrowings under bank line of credit and other (26,391) 30,000
Increase in Receivable from Parent (1,660) (2,022)
Decrease in Due to Parent (5,688) (1,947)
Repurchase of common stock (732) (4,894)
Issuance of common stock 163 --
------------------- -------------------
Net cash (used in) provided by financing activities (34,308) 21,137
------------------- -------------------
Net increase in cash 26 904
Cash at beginning of period 9 70
------------------- -------------------
Cash at end of period $ 35 974
=================== ===================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------------------
1999 1998
------------------- -------------------
<S>
Supplemental disclosures of cash flow information cash paid
during the period for: <C> <C>
Interest (excluding capitalized amounts of $1,047 and $312,
respectively) $ 212 110
Income taxes 16,526 13,212
</TABLE>
5
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Notes to the Condensed Consolidated
Financial Statements
(dollars in thousands except per share amounts)
(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) and Fractional Interests in vacation
properties. 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 and Fractional Interest sales and, to a lesser
extent, from the financing of Vacation Credit and Fractional Interest sales and
from its management agreement with WorldMark.
These condensed 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 and
nine months ended September 30, 1999, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1999.
These statements should be read in conjunction with the audited financial
statements and footnotes included in the Company's 1998 Form 10-K filed with the
Securities and Exchange Commission (SEC). The accounting policies used in
preparing these financial statements are the same as those described in such
Form 10-K.
Note 2 - New Accounting Pronouncements
In April, 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AICPA) issued Statement of Position
(SOP) 98-5, Reporting on the Costs of Start-Up Activities. This SOP was
effective on January 1, 1999, and has not impacted the Company's financial
position or results of operations.
In June, 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. This Statement is effective as of the beginning of the
first quarter of the fiscal year beginning after June 15, 2000. The Company does
not anticipate a material impact on its financial position or results of
operations from the future adoption of this standard.
Note 3 - Sale and Securitization of Notes Receivable
On April 15, 1999, the Company created a wholly-owned, special purpose finance
company, TW Holdings II, Inc (TW Holdings II). At the same time, the Company
entered into a $75 million, 364-day Receivables Warehouse facility (Facility)
with Prudential Securities Credit Corporation. The Facility has an advance rate
of 90% and has a required yield of LIBOR plus 100 basis points.
On June 17, 1999, the Company chose not to renew the revolving portion of the
$98 million Receivable Transfer Agreement from the Bank Group. In conjunction
with the private placement of Notes Receivable in August 1999, the Company was
able to transfer the TW Holdings, Inc. (TW Holdings), receivables to a new
special-purpose entity TRI Funding III, Inc. (TRI Funding III), and retire the
credit facility.
In August 1999, the Company sold certain Notes Receivable to TRI Funding III,
for cash, a subordinated note payable from TRI Funding III and a residual
interest in the excess cash flows of TRI Funding III. TRI Funding III issued six
classes of senior notes to institutional investors. The subordinated note
payable from TRI Funding III represents the Company's retained interest in Notes
Receivable which provides collateral to the holders of the notes issued by the
entity and is classified as Notes Receivable on the accompanying balance sheets.
The residual interest in the excess cash flows is classified as residual
interest in Notes Receivable sold and is measured at fair value.
6
<PAGE>
Note 4 - Basic and Diluted Net Income Per Common Share
The following illustrates the reconciliation of weighted average shares used for
basic and diluted net income per share:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
---------------------------------- ------------------------------------
1999 1998 1999 1998
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Basic
Weighted average shares outstanding 17,128,830 17,308,564 17,142,331 17,498,086
Diluted
Effect of dilutive securities 63,421 -- 47,563 --
---------------- -------------- --------------- ---------------
Diluted weighted average shares outstanding 17,192,251 17,308,564 17,189,894 17,498,086
================ ============== =============== ===============
</TABLE>
Net income available to common shareholders for basic and diluted net income per
share was $8,864 and $5,884 for the three months ended September 30, 1999, and
1998, and $26,518 and $16,912 for the nine months ended September 30, 1999, and
1998, respectively.
At September 30, 1999, and 1998, there were outstanding options to purchase
433,500 and 487,000 shares of common stock, respectively, which were
anti-dilutive and therefore not included in the computation of diluted net
income per common share.
Note 5 - Inventories
Inventories consist of Vacation Credits, Fractional Interests and construction
in progress as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------------- ------------------
<S> <C> <C>
Vacation Credits $ 7,553 11,342
Fractional Interests 757 --
Construction in progress 32,905 30,967
----------------- ------------------
Total inventories $ 41,215 42,309
================= ==================
</TABLE>
7
<PAGE>
Note 6 - 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 nine months ended September 30, 1999, and
the year ended December 31, 1998:
<TABLE>
<CAPTION>
1999 1998
----------------- ------------------
<S> <C> <C>
Balances at beginning of period $ 20,935 15,240
Provision for doubtful accounts, sales returns and
recourse liability 16,166 15,435
Notes Receivable charged-off and sales returns net of
Vacation Credits recovered (9,991) (9,919)
Recoveries 176 179
----------------- ------------------
Balances at end of period $ 27,286 20,935
================= ==================
Allowance for doubtful accounts and sales returns $ 16,126 12,363
Recourse liability on Notes Receivable sold 11,160 8,572
----------------- ------------------
$ 27,286 20,935
================= ==================
</TABLE>
Total Notes Receivable outstanding, including Notes Receivable sold, amounted to
$370,028 and $307,740 at September 30, 1999, and December 31, 1998,
respectively.
Note 7 - Commitments and Contingencies
(a) Purchase Commitments
The Company routinely enters into purchase agreements with various developers to
acquire and build resort properties. At September 30, 1999, the Company had
outstanding purchase commitments of $44.2 million 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 8 - Segment Reporting
The Company has two reportable segments: sales and financing. The sales segment
markets and sells timeshare memberships and Fractional Interests. The finance
segment is primarily responsible for servicing and collecting Notes Receivable
originated in conjunction with the financing of sales of Vacation Credits and
Fractional Interests. The finance segment does not include TW Holdings, TW
Holdings II, Trendwest Funding I, Inc., Trendwest Funding II, Inc., and
Trendwest Funding III. Management evaluates the business based on sales and
marketing activities as these are the primary drivers of the business.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
based on profits or losses from sales and marketing activities on a pre-tax
basis. Intersegment revenues are recorded at market rates as if the transactions
occurred with third parties. Assets are not reported by segment.
8
<PAGE>
The following tables summarize the segment activity of the Company:
<TABLE>
<CAPTION>
Segment
Three months ended September 30, 1999: Sales Finance Other Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
External revenue $ 62,951 923 573 64,447
Interest revenue - net -- 1,514 -- 1,514
Interest revenue-intersegment -- 1,039 -- 1,039
Intersegment revenue -- 416 -- 416
----------- ----------- ----------- -------------
Segment revenue $ 62,951 3,892 573 67,416
Segment profit $ 11,500 2,723 135 14,358
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 5,422 -- -- 5,422
Segment
Three months ended September 30, 1998: Sales Finance Other Total
----------- ----------- ----------- -------------
External revenue $ 46,530 926 521 47,977
Interest revenue - net -- 927 -- 927
Interest revenue-intersegment -- 811 -- 811
Intersegment revenue -- 157 -- 157
----------- ----------- ----------- -------------
Segment revenue $ 46,530 2,821 521 49,872
Segment profit $ 6,852 1,993 174 9,019
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 4,053 -- -- 4,053
Segment
Nine months ended September 30, 1999: Sales Finance Other Total
----------- ----------- ----------- -------------
External revenue $ 175,393 3,399 2,348 181,140
Interest revenue - net -- 3,706 -- 3,706
Interest revenue-intersegment -- 2,626 -- 2,626
Intersegment revenue -- 1,481 -- 1,481
----------- ----------- ----------- -------------
Segment revenue $ 175,393 11,212 2,348 188,953
Segment profit $ 29,776 7,903 1,092 38,771
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 16,166 -- -- 16,166
Gain on sale of property and equipment $ -- 870 -- 870
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Segment
Nine months ended September 30, 1998: Sales Finance Other Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
External revenue $ 123,403 2,404 1,517 127,324
Interest revenue - net -- 2,730 -- 2,730
Interest revenue-intersegment -- 2,109 -- 2,109
Intersegment revenue -- 696 -- 696
----------- ----------- ----------- -------------
Segment revenue $ 123,403 7,939 1,517 132,859
Segment profit $ 18,055 5,507 571 24,133
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 11,114 -- -- 11,114
</TABLE>
The following table provides a reconciliation of segment revenues and profits to
the consolidated amounts:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Segment revenue $ 67,416 49,872 188,953 132,859
Interest expense reported net of interest
income 16 204 125 242
Elimination of intersegment revenue (1,455) (968) (4,107) (2,805)
Finance subsidiaries revenue 6,017 4,085 20,222 13,714
----------- ----------- ------------ -------------
Consolidated revenue $ 71,994 53,193 205,193 144,010
=========== =========== ============ =============
Segment profit $ 14,358 9,019 38,771 24,133
Corporate overhead not included in segment
reporting (3,683) (2,733) (10,672) (8,150)
Finance subsidiaries profit 3,897 3,106 15,415 10,870
----------- ----------- ------------ -------------
Consolidated pre-tax income $ 14,572 9,392 43,514 26,853
=========== =========== ============ =============
</TABLE>
All of the Company's revenue from external customers is derived from sales
within the United States.
Note 9 - Subsequent Event
On October 21, 1999, the Company entered into a forward exchange contract to
deliver $6.6 million CDN at a rate of 1.4752 CND/USD on February 15, 2000.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 1999 to the three months
ended September 30, 1998
The Company achieved total revenues of $72.0 million for the three months ended
September 30, 1999, compared to $53.2 million for the three months ended
September 30, 1998, an increase of 35.3%. The principal reasons for the overall
improvement were a 26.2% increase in Vacation Credit sales to $58.7 million for
the three months ended September 30, 1999, from $46.5 million for the three
months ended September 30, 1998, sales of Fractional Interests of $4.3 million
and gains on sales of Notes Receivable from the August, 1999, private placement.
The Fractional Interest sales program commenced pre-selling of fractional
interests at the Depoe Bay resort on the Oregon Coast in October 1998. The
10
<PAGE>
Company exercised its purchase option in April of 1999 and began recognizing
revenue from the pre-sales at that time. The increase in Vacation Credit sales
was primarily the result of a 21.0% increase in the number of Vacation Credits
sold to 43.2 million during the three months ended September 30, 1999, from 35.7
million during the three months ended September 30, 1998. This increase was the
result of the continued maturation of sales offices opened in 1998 and increased
Upgrade sales. Revenues from Upgrade sales increased 22.2% to $7.7 million for
the three months ended September 30, 1999, from $6.3 million for the three
months ended September 30, 1998, due primarily to an increase of 22.7% in the
number of Vacation Credits sold as Upgrades during the three months ended
September 30, 1999, compared to the three months ended September 30, 1998. The
average price per Vacation Credit sold increased to $1.36 per credit for the
three months ended September 30, 1999, versus $1.29 per credit for the three
months ended September 30, 1998, and reflected an approximate 4% increase in the
selling price of Vacation Credits, effective June 28, 1999.
Finance income increased 5.9% to $3.6 million for the three months ended
September 30, 1999, from $3.4 million for the three months ended September 30,
1998. The increase in finance income primarily reflects the increase in carrying
balances of Notes Receivable for the two periods compared. Gains on sales of
Notes Receivable increased 117.0% to $3.9 million for the three months ended
September 30, 1999 from $1.8 million for the three months ended September 30,
1998, due primarily to an increase in the principal balances of Notes Receivable
sold and the August, 1999, asset backed securitization of $160.0 million of
Notes Receivable through Prudential Securities. The Notes were issued by a newly
formed special purpose entity, TRI Funding III, Inc., and will be secured by the
cash flow on $169.7 million of receivables, and a reserve account.
Vacation Credit and Fractional Interest cost of sales increased to $18.1 million
for the three months ended September 30, 1999, from $13.4 million for the three
months ended September 30, 1998, an increase of 35.1%, primarily reflecting the
increase in sales of Vacation Credits and Fractional Interests. Sales
recognition of Fractional Interests began in the second quarter of 1999, and
have a higher relative product cost, as a percentage of Vacation Credit and
Fractional Interest sales, than Vacation Credits which is offset by the lower
sales and marketing costs. As a percentage of Vacation Credit and Fractional
Interests sales, cost of sales remained comparable at 28.7% and 28.8% of
Vacation Credit and Fractional Interest sales for the two periods compared.
Lower cost of sales for Vacation Credits sold, for the two periods compared,
were offset by the higher cost of sales of Fractional Interests sold for the two
periods compared.
Sales and marketing costs increased 24.7% to $27.8 million for the three months
ended September 30, 1999, from $22.3 million for the three months ended
September 30, 1998. As a percentage of Vacation Credit and Fractional Interest
sales, sales and marketing costs decreased to 44.1% for the three months ended
September 30, 1999, from 48.0% for the three months ended September 30, 1998.
This decrease reflects the sales generated from the new Fractional Interest
sales program which has significantly lower sales and marketing costs than
Vacation Credit sales. In addition, the new sales offices opened during 1998
have improved closing percentages over last year's start-up phase which further
reduces sales and marketing costs. The improvement in sales and marketing costs
is also attributable to the price increase effective June 29, 1999, and the
changes to the commissions program effective June 30, 1998.
General and administrative expenses increased 59.5% to $6.7 million for the
three months ended September 30, 1999 from $4.2 million for the three months
ended September 30, 1998. As a percentage of total revenue, general and
administrative costs increased to 9.3% for the three months ended September 30,
1999 from 7.9% for the three months ended September 30, 1998. The increase is
the result of additions to the infrastructure to support the Company's continued
growth.
Provision for doubtful accounts and recourse liability increased 37.5% to $4.4
million for the three months ended September 30, 1999 from $3.2 million for the
three months ended September 30, 1998. As a percentage of Vacation Credit and
Fractional Interest sales, the provision remained comparable at 7.0% for the
three months ended September 30, 1999 and 6.9% for the three months ended
September 30, 1998.
11
<PAGE>
Comparison of the nine months ended September 30, 1999 to the nine months ended
September 30, 1998
The Company achieved total revenues of $205.2 million for the nine months ended
September 30, 1999, compared to $144.0 million for the nine months ended
September 30, 1998, an increase of 42.5%. The principal reasons for the overall
improvement were a 32.7% increase in Vacation Credit sales to $163.8 million for
the nine months ended September 30, 1999, from $123.4 million for the nine
months ended September 30, 1998, and sales of Fractional Interests of $11.6
million. The Fractional Interest sales program commenced pre-selling of
Fractional Interests at the Depoe Bay resort on the Oregon Coast in October
1998. The Company exercised its purchase option in April of 1999 and began
recognizing revenue from the pre-sales at that time. The increase in Vacation
Credit sales was primarily the result of a 29.1% increase in the number of
Vacation Credits sold to 123.2 million during the nine months ended September
30, 1999, from 95.4 million during the nine months ended September 30, 1998 and
resulted from the continued maturation of sales offices opened in 1998 and
increased Upgrade sales. Revenues from Upgrade sales increased 20.6% to $22.8
million for the nine months ended September 30, 1999 from $18.9 million for the
nine months ended September 30, 1998, due primarily to an increase of 20.3% in
the number of Vacation Credits sold as Upgrades during the nine months ended
September 30, 1999, compared to the nine months ended September 30, 1998. The
average price per Vacation Credit sold increased to $1.33 per credit for the
nine months ended September 30, 1999, versus $1.27 per credit for the nine
months ended September 30, 1998, and reflected the approximate 4% increases in
the selling price of Vacation Credits, effective June 29, 1998 and June 28,
1999, respectively.
Finance income increased 13.5% to $10.9 million for the nine months ended
September 30, 1999, compared to $9.6 million for the nine months ended September
30, 1998. The increase in finance income reflects the increase in carrying
balances of Notes Receivable for the two periods compared. Gains on sales of
Notes Receivable increased 85.7% to $13.0 million for the nine months ended
September 30, 1999, from $7.0 million for the nine months ended September 30,
1998 due primarily to an increase in the principal balances of Notes Receivable
sold and the August 1999, asset backed securitization of $160.0 million of Notes
Receivable through Prudential Securities.
Other income increased $1.0 million to $3.5 million for the nine months ended
September 30, 1999, compared to $2.5 million for the nine months ended September
30, 1998, due primarily to a gain recorded on the sale of the Bellevue Corporate
building of $.9 million in March of 1999.
Vacation Credit and Fractional Interest cost of sales increased to $52.2 million
for the nine months ended September 30, 1999, from $34.1 million for the nine
months ended September 30, 1998, an increase of 53.1%, primarily reflecting the
increase in sales of Vacation Credits and Fractional Interests. Sales
recognition of Fractional Interests began in the second quarter of 1999, and
have a higher relative product cost, as a percentage of Vacation Credit and
Fractional Interest sales, than Vacation Credits which is offset by the lower
sales and marketing costs. As a percentage of Vacation Credit and Fractional
Interests sales, cost of sales increased to 29.8% for the nine months ended
September 30, 1999 compared to 27.6% for the nine months ended September 30,
1998.
Sales and marketing costs increased 27.9% to $78.0 million for the nine months
ended September 30, 1999, from $61.0 million for the nine months ended September
30, 1998. As a percentage of Vacation Credit and Fractional Interest sales,
sales and marketing costs decreased to 44.5% for the nine months ended September
30, 1999, from 49.4% for the nine months ended September 30, 1998. This decrease
reflects the sales generated from the new Fractional Interest sales program
which has significantly lower sales and marketing costs than Vacation Credit
sales. In addition, the new sales offices opened during 1998 have improved
closing percentages over last year's start-up phase which further reduces sales
and marketing costs. The improvement in sales and marketing costs is also
attributable to the price increases effective in late June 1998 and late June
1999, respectively, and the changes to the commissions program effective June
30, 1998.
General and administrative expenses increased 45.5% to $17.9 million for the
nine months ended September 30, 1999 from $12.3 million for the nine months
ended September 30, 1998. As a percentage of total revenue, general and
administrative costs were comparable at 8.7% and 8.5% of total revenue for the
two periods compared.
Provision for doubtful accounts and recourse liability increased 43.5% to $12.2
million for the nine months ended September 30, 1999 from $8.5 million for the
12
<PAGE>
nine months ended September 30, 1998. As a percentage of Vacation Credit and
Fractional Interest sales, the provision remained comparable at 7.0% and 6.9%
for the nine months ended September 30, 1999, and 1998, respectively.
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 September 30, 1999, and December 31,
1998, were $27.3 million, and $20.9 million, respectively, representing
approximately 7.4% and 6.8%, 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 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 September 30, 1999, and December 31, 1998, 1.80%
and 1.97% of the Company's total receivables portfolio of $370.0 million and
$307.7 million, respectively, 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 and Fractional Interests which are financed, cash sales of
Vacation Credits and Fractional Interests, 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 nine months ended September 30, 1999 and 1998, cash provided by (used
in) operating activities was $34.6 million and ($14.0) million, respectively.
Cash generated from operating activities increased principally due to the
increased sales of Notes Receivable. For the first nine months of 1999, cash
used in operating activities was principally for the issuance and purchase of
Notes Receivable of $159.1 million to finance the purchase of Vacation Credits
by Owners. Cash provided by operating activities resulted primarily from sales
and repayments of Notes Receivable of $155.4 million and net income of $26.5
million. For the nine months ended September 30, 1998, cash used in operating
activities was principally for the issuance and purchase of Notes Receivable of
$126.1 million to finance the purchase of Vacation Credits by Owners. Cash
provided by operating activities resulted primarily from the sale and repayment
of Notes Receivable of $95.5 million and net income of $16.9 million.
Net cash used in investing activities for the nine months ended September 30,
1999 and 1998, was $.3 million and $6.2 million, respectively. Cash provided by
investing activities was the result of $4.4 million in proceeds from the sale of
the Bellevue corporate building. Cash used in investing activities for the nine
months ended September 30, 1999, of $4.7 million was the result of final
retention payments on the new corporate headquarters and furniture and equipment
related to the new building. Cash used for the same period in 1998 of $6.1
million was for progress payments on the new corporate headquarters, the
acquisition of furniture and fixtures and data processing equipment required to
meet the growth of the Company.
Net cash (used in) provided by financing activities for the nine months ended
September 30, 1999 and 1998, was ($34.3) million and $21.1 million,
respectively. For the nine months ended September 30, 1999, cash used in
financing activities was the result of $26.4 million reduction in net borrowings
under bank line of credit and other, a $5.7 million decrease in due to Parent, a
$1.7 million increase in receivable from parent and $.7 million repurchase of
common stock. For the nine months ended September 30, 1998, cash used in
financing activities was principally the result of repurchasing $4.9 million or
434,600 shares of common stock. Cash provided was principally the result of
borrowings of $30.0 million on the Company's $30.0 million revolving credit
facility.
13
<PAGE>
Financing of Notes Receivable had been accomplished by use of a $98.0 million
Receivable Transfer Agreement from the Bank Group through TW Holdings and a new
$75.0 million Receivables Warehouse facility with Prudential Securities Credit
Corporation through TW Holdings II. On June 17, 1999, the Company chose not to
renew the revolving portion of the $98 million Receivable Transfer Agreement
from the Bank Group. The TW Holdings receivables were transferred to a new
special-purpose entity TRI Funding III in conjunction with a private placement
of Notes Receivable in August of 1999 and the credit facility was retired. At
September 30, 1999, $10 million of receivables were outstanding and transferred
under the $75 million TW Holdings II Receivables Warehouse facility.
In August 1999, the Company sold certain Notes Receivable to TRI Funding III,
for cash, a subordinated note payable from TRI Funding III and a residual
interest in the excess cash flows of TRI Funding III.
The Company has a $10 million open line of credit with the Parent which bears
interest at prime plus 1% (currently 9.25%) per annum. The line of credit is
payable on demand. As of September 30, 1999, there was no outstanding
indebtedness to the Parent. The Company may advance excess funds to the Parent
at prime rate minus 2% (currently 6.25%) per annum. At September 30, 1999 there
was a $1.7 million Receivable from Parent. The Company also has a $30.0 million
unsecured revolving line of credit. Outstanding borrowings on the line of credit
were $2.0 million at September 30, 1999.
Through the end of 2000, the Company anticipates spending approximately $121.4
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 2000.
WorldMark maintains a replacement reserve for the WorldMark Resorts which is
funded from the annual assessments of the Owners. At September 30, 1999, the
amount of such reserve was approximately $11.2 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 1998 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.
YEAR 2000 STATUS
The Year 2000 issue relates to a flaw in many electronic data processing systems
which prevents them from processing year-date data accurately beyond the year
1999. This is the result of using a two-digit representation for the year, for
example "99" for "1999". This approach assumed that the first two digits of the
abbreviated date are "19". However, when the computer reaches 2000 it may
interpret "00" as the year 1900 possibly causing inaccurate data processing or
processing to stop altogether.
As of September 30, 1999, mission-critical applications such as Reservations,
Contract Processing, Collections and Marketing have been analyzed and tested and
the Company has determined that all these applications are Year 2000 compliant.
Each of these critical applications is currently operating in the live
environment. In many cases, the applications are performing transactions with
Year 2000 dates and the Company has not experienced any Year 2000 issues.
14
<PAGE>
The Company expended considerable effort in the third quarter to monitor the
Year 2000 compliance program of Sage Systems, Inc. (Sage), the servicer of the
Company's Notes Receivable portfolio. Sage and the Company worked closely
together to analyze all of the date-sensitive code, which Sage utilizes to
service the Company's receivables. Every line of this code was reviewed and the
necessary remediation was performed. The Company and Sage performed tests on the
remediated code to verify it was Year 2000 compliant.
The Company has incurred approximately $.8 million to date to modify or replace
software in order to remediate the Year 2000 issue and has $.2 million budgeted
for any potential future expenditures.
Based on its current assessments and remediation plans, the Company does not
expect that it will suffer any material disruption of its business as a result
of the Year 2000 issue. Nevertheless, the Company will be performing further
testing and developing Year 2000 contingency plans between now and the end of
the calendar year.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to interest rate changes primarily as a result of its
financing of timeshare purchases, the sale and securitization of notes
receivable and borrowing under revolving lines of credit. The Company's interest
rate risk management objective is to limit the impact of interest rate changes
on earnings and cash flows and to reduce overall borrowing costs. To achieve its
objectives, the Company borrows funds, sells or securitizes Notes Receivable
primarily at fixed rates and may enter into derivative financial instruments
such as interest rate swaps, caps and treasury locks in order to mitigate its
interest rate risk on a related financial instrument. The Company does not
maintain a trading account for any class of financial instrument, it does not
purchase high risk derivative instruments and it is not directly subject to
commodity price risk. There have been no material changes to the Company's
exposure to market risk since December 31, 1998.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Incorporated by reference. See Note 7 of "Notes to Condensed
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
3.1 Restated Articles of Incorporation (1)
3.2 Restated Bylaws (1)
11 Statement re: Computation of Earnings per share. Incorporated
by reference. See Note 4 of "Notes to Condensed
Consolidated Financial Statements."
10.44 Receivables Purchase Agreement among Registrant, TRI Funding
II, Inc., TRI Funding Company I, LLC, TW Holdings, Inc., TW
Holdings II, Inc., and TRI Funding III, Inc., dated as of
August 1, 1999.
10.45 Indenture among Registrant, TRI Funding III, Inc. and
Norwest Bank Minnesota, National Association Dated as
of August 1, 1999.
10.46 Servicing Agreement among Registrant, TRI Funding III, Inc.
and Norwest Bank Minnesota, National Association Dated as
of August 1, 1999.
10.47 Purchase Agreement Between TRI Funding III, Inc., and
Prudential Securities Incorporated Dated August 18, 1999.
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement
on Form S-1 (File No. 333-26861).
(b) Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRENDWEST RESORTS, INC.
Date: November 12, 1999 /s/ WILLIAM F. PEARE
------------------- --------------------------------------
William F. Peare
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: November 12, 1999 /s/ GARY A. FLORENCE
------------------- --------------------------------------
Gary A. Florence
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
EXHIBIT 10.44
RECEIVABLES PURCHASE AGREEMENT
among
TRI FUNDING II, INC.
("TRI II")
and
TRI FUNDING COMPANY I, L.L.C.
("TRI I")
and
TRENDWEST RESORTS, INC.
("Trendwest")
and
TW HOLDINGS, INC.
("TW HOLDINGS")
and
TW HOLDINGS II, INC.
("TW II")
and
TRI FUNDING III, INC.
(the "Issuer")
Dated as of August 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................................2
Section 1.01. Defined Terms..........................................................................2
ARTICLE 2 ACQUISITION OF ASSETS..................................................................4
Section 2.01. [Reserved.]............................................................................4
Section 2.02. Initial Acquisition....................................................................4
Section 2.03. Subsequent Acquisitions................................................................4
Section 2.04. Delivery of Contracts; Filing of Financing Statements..................................4
Section 2.05. Servicing of Contracts and Related Vacation Credits....................................5
Section 2.06. Review of Contracts....................................................................5
ARTICLE 3 REPRESENTATIONS AND WARRANTEES.........................................................6
Section 3.01. Representations and Warranties of the Sellers..........................................6
Section 3.02. Representations and Warranties the Issuer.............................................14
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties....................................................15
Section 3.04. Requirements for Purchase or Substitution of Contracts................................16
ARTICLE 4 SELLER COVENANTS......................................................................17
Section 4.01. Seller Covenants......................................................................17
Section 4.02. Issuer Covenants......................................................................21
Section 4.03. Assignment of Assets..................................................................22
ARTICLE 5 CONDITIONS PRECEDENT..................................................................22
Section 5.01. Conditions to Issuer's Initial Obligations............................................22
Section 5.02. Conditions to the Sellers'Obligations.................................................23
ARTICLE 6 TERM AND TERMINATION..................................................................24
Section 6.01. Term..................................................................................24
Section 6.02. Default by Sellers....................................................................24
ARTICLE 7 MISCELLANEOUS.........................................................................24
Section 7.01. Amendments............................................................................24
Section 7.02. Governing Law.........................................................................24
Section 7.03. Notices...............................................................................25
Section 7.04. Separability Clause...................................................................25
Section 7.05. Assignment............................................................................25
<PAGE>
Section 7.06. Further Assurances....................................................................25
Section 7.07. No Waivers; Cumulative Remedies.......................................................25
Section 7.08. Binding Effect; Third Party Beneficiaries.............................................26
Section 7.09. Set-Off...............................................................................26
Section 7.10. Sellers Will Not Institute Insolvency Proceedings.....................................26
Section 7.11. Counterparts..........................................................................26
Signature Page...................................................................................................27
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
EXHIBIT D -- FORM OF SUBORDINATED NOTe
</TABLE>
<PAGE>
THIS RECEIVABLES PURCHASE AGREEMENT, dated as of August 1, 1999 (this
"Agreement"), by and among TRI Funding II, Inc., a Delaware corporation (herein,
together with its permitted successors and assigns, "TRI II"), TRI Funding
Company I, L.L.C., a Delaware limited liability company (herein, together with
its permitted successors and assigns, "TRI I"), Trendwest Resorts, Inc., an
Oregon corporation (herein, together with its permitted successors and assigns,
"Trendwest"), TW Holdings II, Inc., a Delaware corporation (herein, together
with its permitted successors and assigns, "TW II"), TW Holdings, Inc., a Nevada
corporation (herein, together with its permitted successors and assigns, "TW
Holdings"), and TRI Funding III, Inc., a Delaware corporation (herein, together
with its permitted successors and assigns, the "Issuer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of August 1, 1999
(as amended and supplemented from time to time, the "Indenture"), with Norwest
Bank Minnesota, National Association, 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, as provided in the
Indenture (the "Notes"), limited as to principal amount.
In furtherance thereof, TRI I, TRI II, Trendwest, TW II and TW Holdings
(collectively, the "Sellers") and the Issuer have entered into this Agreement to
provide for, among other things, the acquisition and purchase by the Issuer from
time to time of all of the right, title and interest in and to certain Assets.
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 and
the Servicer will enter into the Servicing Agreement, dated as of August 1, 1999
(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 the Notes and pursuant to this Agreement, Trendwest, TW II and
TW Holdings, on the Closing Date, and Trendwest, TRI I and TRI II, from time to
time, will sell the Assets to the Issuer. Such sales shall be effected on the
Closing Date by this Agreement and an Asset Assignment (as defined herein) among
Trendwest, TW II, TW Holdings and the Issuer, and on each Subsequent Transfer
Date by this Agreement and the applicable Subsequent Asset Assignment (as
defined herein) among Trendwest, TRI I and TRI II, as applicable, and the
Issuer, and the list of Contracts so conveyed shall be listed on Schedule I to
the Asset Assignment or the applicable Subsequent Asset Assignment.
In order to further secure the Notes, the Issuer subsequently will
grant to the Trustee pursuant to the Indenture, a security interest in, among
other things, the Issuer's rights derived under this Agreement, and the Sellers
agree that all representations, warranties, covenants and
1
<PAGE>
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 Notes. In consideration for the Assets and their
representations, warranties, covenants and other agreements under this
Agreement, on the Closing Date, TW Holdings and TW II will receive cash, and
Trendwest will receive from the Issuer cash, a Subordinated Note (as defined
herein) and all of the common stock of the Issuer. On each Subsequent Transfer
Date, TRI I and TRI II, as applicable, will receive cash, and Trendwest will
receive cash and increase in the principal amount outstanding of the
Subordinated Note in exchange for the Assets sold by such Person on such date.
ARTICLE 1
DEFINITIONS
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.
"Acquisition Consideration" shall mean, with respect to any Contracts
and the related Receivables, the cash which shall be paid by the Issuer to the
Sellers on the Closing Date, and, with respect to Trendwest, (i) on the Closing
Date, all of the stock of the Issuer, the Subordinated Note and cash and (ii) on
each Subsequent Transfer Date, cash.
"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 the Issuer 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
Cut-Off Date, (b) the Contract Files and the Collateral Agent Files, (c) the
Sellers' rights and interests in the related Vacation 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.
2
<PAGE>
"Collateral Agent" shall mean Sage Systems, Inc. and its permitted
successors and assigns.
"Collateral Agent File" shall mean, with respect to each Contract, the
following documents:
(i) the original Contract; and
(ii) notice of assignment.
"Cut-Off Date" shall have the meaning set forth in the Indenture.
"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 on which there has been made at
least two scheduled payments.
"Indenture" shall mean the Indenture, dated as of August 1, 1999, by
and among the Issuer, the Trustee and the Servicer, as amended and supplemented
from time to time.
"Issuer Address" shall mean 9805 Willows Road, Redmond, Washington
98052.
"Seller Address" with respect to Trendwest shall mean 9805 Willows
Road, Redmond, Washington 98052, with respect to TW Holdings shall mean 245 E.
Liberty Street, 3rd Floor, Reno, Nevada 89520, with respect to the TRI I shall
mean 3250 Lakeport Boulevard, Klamath Falls, Oregon 97601, with respect to TRI
II shall mean 3250 Lakeport Boulevard, Klamath Falls, Oregon 97601 and with
respect to TW II shall mean 9805 Willows Road, Redwood, WA 98052.
"Subsequent Asset Assignment" shall mean each 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 one or more of
Trendwest, TRI I and TRI II, as applicable, to the Issuer on each Subsequent
Transfer Date.
"Subsequent Contract" shall mean a Contract that a Seller contributes
to the Issuer pursuant to this Agreement on the related Subsequent Transfer Date
during the Prefunding Period and identified on Schedule I to the related
Subsequent Asset Assignment.
"Subsequent Transfer Date" shall mean any Business Day during the
Prefunding Period on which the applicable Sellers contribute Assets to the
Issuer pursuant to this Agreement and the related Subsequent Asset Assignment.
3
<PAGE>
"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.
"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 ASSETS
Section 2.01. [Reserved.]
Section 2.02. Initial Acquisition. In return for the Acquisition
Consideration with respect to the Assets transferred on the Closing Date and
other rights created by this Agreement, each of Trendwest, TW II and TW Holdings
hereby transfers, assigns, sells and grants to the Issuer, 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
such Assets relating to the Contracts set forth on Schedule I to the Asset
Assignment. Each of the Sellers hereby acknowledges that its transfer of such
Assets to the Issuer is absolute and irrevocable, without reservation or
retention of any interest whatsoever by such Seller.
Section 2.03. Subsequent Acquisitions. TRI I, TRI II and Trendwest in
exchange for cash shall transfer, assign, sell and grant to the Issuer, without
recourse except as provided in Section 3.03 of this Agreement, on each
Subsequent Transfer Date, any and all of such Seller's right, title and interest
in and to all of the Assets relating to the Contracts set forth on Schedule I to
the related Subsequent Asset Assignments. Each of Trendwest, TRI I and TRI II
acknowledges that its transfer of such Assets to the Issuer 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 the Issuer's acquisition of the Assets, Trendwest, on behalf
of the Sellers and the Issuer, shall deliver, or cause the delivery of, the
original Contracts to the Collateral Agent so that the Collateral Agent may
retain possession, as agent of the Trustee thereof as provided in the
Transaction Documents. In addition, the Sellers agree to execute, and Trendwest
agrees to
4
<PAGE>
record and file prior to the Closing Date or the Subsequent Transfer Date, as
the case may be, 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 the Issuer in accordance with
this Agreement and transferred 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 the Issuer that the Issuer
is acquiring full and absolute title to the Assets. If it is determined,
however, that the Sellers have transferred to the Issuer a security interest in
the Assets, then this Agreement shall constitute a security agreement under
applicable law, and each of the Sellers shall be deemed to have granted to the
Issuer, as of the date hereof, a first priority perfected security interest in
such Seller's right, title and interest in the Assets.
Section 2.05. Servicing of Contracts and Related Vacation 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
Collateral Agent (who shall thereupon notify the Issuer, Trendwest and the
Trustee) discovers that any Contracts, Contract Files or Collateral Agent Files
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 Collateral Agent 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 the
Issuer in accordance with Section 3.03 hereof.
5
<PAGE>
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, TRI I,
with respect to the Contracts and related Receivables transferred by TRI I, TRI
II, with respect to the Contracts and related Receivables transferred by TRI II,
TW Holdings, with respect to the Contracts and related Receivables transferred
by TW Holdings, TWII, with respect to the Contracts and related Receivables
transferred by TWII, hereby and by the Asset Assignment and each Subsequent
Asset Assignment, hereby makes the following representations and warranties to
the Issuer and for the benefit of the Issuer, the Trustee and Holders of Notes,
on which the Issuer relies in acquiring the Assets and on which the Holders rely
in purchasing such Notes. Such representations and warranties shall survive any
subsequent transfer, assignment, contribution or conveyance of the Contracts and
related Receivables and interest in the related Vacation Credits and any
issuance of Notes.
(a) As to each Contract, as of the Closing Date, with respect
to the Contracts identified on the Contract Schedule on the Closing
Date and as of the related Subsequent Transfer Date, with respect to
Subsequent Contracts:
(i) The information set forth in the Contract
Schedule is true and correct as of the related 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 Collateral Agent 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 Collateral Agent.
(iv) The Electronic Ledgers have been marked as
provided in Section 2.04(b) hereof.
6
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(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 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 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 of 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 Trust Estate, a
first priority security interest of the Issuer and the Trustee
in, and the sale by the applicable Seller to the Issuer of,
the Contract and the related Receivables, being acquired and
the transfer of the security interest in the related Vacation
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
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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 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 the Issuer and has done nothing
to impair the rights of the Issuer in such Contract or
payments with respect thereto.
(xvi) The Contract, the related Receivable and the
related Seller's interest in the related Vacation Credits have
not been sold, transferred, assigned or pledged by such Seller
to any Person other than the Issuer (except for such interests
in the Assets which shall be terminated on or prior to the
Closing Date), and upon execution and delivery hereof and of
the Asset Assignment or
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Subsequent Asset Assignment, as applicable, by the related
Seller and the payment by the Issuer of the related
Acquisition Consideration, the Issuer 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 Vacation 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 two payments (which
payments may be advance payments 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) 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 Contract.
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(b) As to the aggregate pool of Contracts supporting Notes as
of the Closing Date and each Subsequent Transfer Date (including those
contracts contributed to the Issuer on such Subsequent Transfer 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
of Trendwest, TRI I and TRI II on each Subsequent Transfer 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 Vacation Credits or
on the ability of such Seller, 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 Certificate of Incorporation, 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 Certificate of Incorporation, 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
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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 Vacation Credits. Such Seller has
not used any address other than its Seller Address, 12301 N.E.
10th Place, Bellevue, Washington 98005 or 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;
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(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 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 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
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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 the Issuer 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 the Issuer 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 Closing Date or
the related Subsequent Transfer Date, as applicable).
(xvi) The Sellers will treat the transfer of the
Assets as a sale to the Issuer 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 the
Issuer 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 the Issuer 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 the Issuer 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.
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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 Sellers rely 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 the
Closing Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Assets or any part
thereof:
(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 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; 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 Sellers'
interest in the Contracts, the Receivables and the related Vacation
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 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 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 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 Assets hereunder.
(c) The Transaction Documents to which the Issuer is a party
have been duly authorized, executed and delivered by the Issuer by all
necessary corporate 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
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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 Closing Date.
(f) The Issuer Address is the principal place of business and
chief executive office of the Issuer.
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties. Upon discovery by the Issuer 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 Vacation Credits, or the interests of the
Holders of the Notes, 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, Receivable or Vacation Credit and is not cured, either (a)
purchase the Issuer's interest in such Contract and the related Receivable from
the Issuer 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 the Issuer's interest in such non-conforming Contracts and the related
Receivables from the Issuer 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 the Issuer 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 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 Indenture) for any losses, claims, damages and
liabilities arising from the
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Issuer's interest in such Contract or the inclusion of the Issuer's interest in
such Contract in the Trust Estate.
Section 3.04. Requirements for Purchase or Substitution of Contracts;
Upgrades. (a) If Trendwest is required to purchase the Issuer's interest in any
Contract and the related Receivables under Section 3.03 hereof 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, each such contract (a "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 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 date
that is six months prior to the Stated Maturity of the Notes 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"), (ii) such Substitute Contract will
have an interest rate that is not 1% less than the original Contract and (iii)
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 the Issuer.
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
Servicing Agreement, the Collateral Agent Agreement and the Indenture just as if
such Substitute Contract had been one of the original Contracts acquired on the
Closing Date. Upon the substitution of a Substitute Contract pursuant to this
Section 3.04(b), the Issuer 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 shall be made either by
remittance of the Purchase Price to the Servicer 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.
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(d) 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 will allow the Obligor to upgrade and transfer the related
Upgrade Contract to the Issuer 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 out of funds distributed to the Issuer pursuant to Section 12.02(d) of
the Indenture or by increasing the amount owed by the Issuer under the
Subordinated Note); provided, however, that (i) such Upgrade Contract must have
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 must be the equal to or greater than the Scheduled Payments
on the existing Contract, (iii) such Obligor must have made all Scheduled
Payments within the time periods required by the related Contract which were due
on or before the date of such Upgrade, (iv) such Upgrade Contract must be
written on one of the standard forms attached as Exhibit A to this Agreement,
(v) the Upgrade Contract is an Eligible Contract, (vi) simultaneous with the
execution of the Upgrade Contract, Trendwest shall have executed a form of
assignment to the Issuer attached to such Upgrade Contract and the Issuer will
pledge such Receivable to the Trustee pursuant to the Indenture, (vii) such
Upgrade Contract shall be delivered by Trendwest to the Collateral Agent
immediately after execution of such contract by the Obligor, WorldMark and
Trendwest (and, in any event, prior to the release of the original Contract),
(viii) any applicable rescission period has expired and (ix) clauses (i)-(viii)
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 Collateral Agent, 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 Contract
Schedule.
Upon the acquisition by the Issuer 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 and the Indenture just as if such Upgrade
Contract had been one of the original Contracts acquired on the Closing Date.
ARTICLE 4
SELLER COVENANTS
Section 4.01. Seller Covenants. Each Seller hereby covenants and agrees
with the Issuer 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
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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 the Issuer 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 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 such Seller nor any of the members, directors,
officers, employees or agents of such Seller (and, with respect to TRI
I, of the members of such 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
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 TRI I, 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
18
<PAGE>
and liens described in Section 3.01(a)(viii) hereof and are reasonably
satisfactory in form and substance to 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 the
Issuer and the Trustee at least 30 days' prior written notice thereof.
(e) Such 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) 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 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 the Issuer, such Seller will enforce such rights on behalf of 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 the Issuer or
the Trustee in the Assets.
(h) Such Seller will advise 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 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 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 the Issuer
harmless from and against any and all loss, liability, damage,
judgment, claim, deficiency or expense
19
<PAGE>
(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
Vacation 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 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 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 the Issuer of all of such Seller's right,
title and interest in the Assets.
(l) Such 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 (x) take,
prior to the complete payment of the Notes, 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) Such Seller shall notify 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 the Issuer 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 the Issuer will
also disclose that the assets of the Issuer are not available to pay
creditors of
20
<PAGE>
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 Vacation 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 Vacation Credits and (ii) mark the Contracts and the
Electronic Ledger to the effect that the Contracts and such Seller's
interest in the related Vacation Credits have been acquired by the
Issuer and a security interest in the related Contracts and the related
Vacation Credits have been granted by such Seller 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 the Issuer's
ownership interest in the Assets. Such Seller will respond to all third
party inquiries confirming the transfer of the 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. Issuer Covenants. The Issuer hereby covenants and agrees
with the Sellers as follows:
(a) The Issuer hereby acknowledges and agrees that its rights
in the related Vacation Credits are expressly subject to the rights of
the related Obligors in such Vacation 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, the Issuer shall submit to Trendwest an instrument of
assignment assigning the Issuer's interest in such Contract and the
related Vacation Credits to Trendwest, 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 of all of the Issuer's right,
title, and interest in and to such Contract, the related Receivable and
the related Vacation 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 the Issuer 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, the Issuer shall, at the
Issuer's expense, take
21
<PAGE>
such steps as the Issuer deems necessary to enforce the Contract,
including bringing suit in the Issuer's name.
(c) The Issuer warrants that, except as contemplated by the
Transaction Documents, it will have ownership of or a valid security
interest in the related Vacation Credits. The Issuer shall not assign,
sell, pledge, or exchange, or in any way encumber or otherwise dispose
of the related Vacation Credits, except as contemplated by or permitted
under the Transaction Documents.
Section 4.03. Assignment of Assets. The Sellers understand that the
Issuer will assign to and grant to the Trustee a security interest in the Assets
(including but not limited to the Receivables, Contracts and the related
Vacation 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 Issuer's Initial Obligations. The
obligations of the Issuer to execute and deliver the Asset Assignment to the
Sellers on the Closing Date and the applicable Subsequent Asset Assignment to
the applicable Sellers on each Subsequent Transfer 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 Contract Schedule shall be true and correct on the
Closing Date and, with respect to Trendwest, each applicable Seller and
each Subsequent Contract, each related Subsequent Transfer Date, with
the same effect as though such representations and warranties had been
made on such date, and on the Closing Date the Sellers shall have
delivered to the Issuer, the Trustee and the Initial Purchaser an
Officer's Certificate to such effect (with respect to the Closing Date
sale only);
(b) All representations and warranties of the Sellers
contained in Section 3.01(a) hereof shall be true and correct on the
Closing Date with respect to the Contracts listed on the Contract
Schedule on the Closing Date and on the related Subsequent Transfer
Date with respect to the Subsequent Contracts, with the same effect as
though such representations and warranties had been made on such date,
and on the Closing Date the Sellers shall have delivered to the Issuer,
the Trustee and the Initial
22
<PAGE>
Purchaser of the Notes an Officer's Certificate to such effect (with
respect to the Closing Date sale only);
(c) The Sellers shall have delivered all other information
theretofore required or reasonably requested by the Issuer 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 the Closing Date
and each Subsequent Transfer Date by the provisions of this Agreement;
(d) On or prior to the Closing Date and each Subsequent
Transfer Date, Trendwest, on behalf of the Sellers shall have
delivered, or caused the delivery of, the Collateral Agent File related
to the Contracts identified in the Contract Schedule to the Collateral
Agent 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
such Contract and the other Assets;
(e) On or before the Closing Date, the Issuer, the Servicer
and the Trustee shall have entered into the Servicing Agreement;
(f) The Notes shall be issued and sold on the 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 the Sellers on such date; and
(g) Each applicable Seller 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 the Issuer 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 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 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
23
<PAGE>
substance to such Seller, and such 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 such Seller may reasonably have requested.
Trendwest's obligation 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, the Issuer 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 the Issuer and the Sellers only with the prior written consent
of the Holders of 66-2/3% in principal amount of the Outstanding Notes of the
Controlling Class.
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.
24
<PAGE>
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 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 any Seller without the prior
written consent of the Issuer, the Trustee and the Holders of 66-2/3% in
principal amount of the Outstanding Notes of the Controlling Class and may not
be assigned or delegated by the Issuer without the prior written consent of each
of the Sellers, the Trustee and the Holders of 66-2/3% in principal amount of
the Outstanding Notes of the Controlling Class.
Section 7.06. Further Assurances. Each of the Sellers and the Issuer
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 the Issuer 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.
25
<PAGE>
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 the Issuer at any time held by or in the possession of such
Seller.
(b) 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 the Issuer may have against such 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. Sellers Will Not Institute Insolvency Proceedings. During
the term of this Agreement and for one year and one day after the termination
hereof, none of the parties hereto or any Affiliate thereof or any Holder of
Outstanding Notes (and each Holder of Outstanding Notes so agrees by acceptance
of a Note) will file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other proceeding under any federal or state bankruptcy or similar law against
the Issuer.
Section 7.11. Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one original document.
26
<PAGE>
IN WITNESS WHEREOF, the Sellers 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 RESORTS, INC.
By
Name:
Title:
TRI FUNDING II, INC.
By
Name:
Title:
TRI FUNDING COMPANY I, L.L.C.
By: TRENDWEST FUNDING I, INC., as member
By
Name:
Title:
TW HOLDINGS, INC.
By
Name:
Title:
27
<PAGE>
TW HOLDINGS II, INC.
By
Name:
Title:
TRI FUNDING III, INC.
By
Name:
Title:
28
<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 August 1, 1999 (the "Agreement"), among Trendwest
Resorts, Inc. ("Trendwest"), TRI Funding Company I, L.L.C., TRI Funding II,
Inc., TW Holdings, Inc., TW Holding II, Inc. and TRI Funding III, Inc. (the
"Issuer"), 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 the Issuer in accordance with the
Agreement and the Asset Assignment and setting forth the Collateral Value of any
Contract being sold to the Issuer by Trendwest 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 August 25, 1999 (the
"Closing Date"), by and among Trendwest Resorts, Inc., an Oregon corporation
("Trendwest"), TW Holdings II, Inc., a Delaware corporation ("TW II"), TW
Holdings, Inc., a Nevada corporation, (together with Trendwest, and TW II, the
"Assignors" and each an "Assignor") and TRI Funding III, 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 III,
Inc., Assignee and the Assignors have executed the Receivables Purchase
Agreement dated as of August 1, 1999 (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 Closing 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 "Vacation Credits").
1.3. All other Assets relating to such Contract.
<PAGE>
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 II, INC.
By
Name:
Title:
TW HOLDINGS, INC., Assignor
By
Name:
Title:
TRI FUNDING III, 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 "Subsequent Transfer Date"), by and among
_________________________________________ (the "Assignor"), and TRI Funding III,
Inc., a Delaware corporation ("Assignee"), with reference to the following
facts:
RECITALS:
A. In connection with the sale of certain assets of the Assignor in
conjunction with the issuance of notes on the date hereof by TRI Funding III,
Inc., Assignee and the Assignor have executed the Receivables Purchase Agreement
dated as of August 1, 1999 (the "Agreement").
B. In connection with the 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 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 Subsequent 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 Assignor and Assignee hereby agree as follows:
1. Assignment. The 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. The 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 "Vacation Credits").
1.3. All other Assets relating to such Contract.
<PAGE>
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 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 each of the Assignor and the Assignee are 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 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 Assignor 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 Assignor and the Assignee 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.
______________________________, Assignor
By
Name:
Title:
TRI FUNDING III, INC., Assignee
By
Name:
Title:
<PAGE>
SCHEDULE I
CONTRACT SCHEDULE
<PAGE>
EXHIBIT D
FORM OF SUBORDINATED NOTE
$------------
TRI FUNDING III, INC.
SUBORDINATED NOTE
Date: August 25, 1999 Stated Maturity: __________, 2___
TRI FUNDING III, INC., a special purpose corporation duly organized and
existing under the laws of the State of Delaware (the "Issuer," which term
includes any successor entity under the Indenture referred to below), for value
received, hereby promises to pay to Trendwest Resorts, Inc. ("Trendwest"), or
its assigns, the principal sum ___________________ Dollars ($_____________) in
monthly installments beginning on September 15, 1999 (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 August 25, 1999 through the last day
of the applicable Due Period immediately preceding the Initial Payment Date for
the 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 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 Notes
(as defined below) are not paid in full on such date, no such amounts shall be
due or payable until the 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 August 1, 1999, among the Issuer, Trendwest Resorts,
Inc., as Servicer, and Norwest Bank Minnesota, National Association, 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 Trendwest or its assigns or by wire transfer
in immediately available funds to the
<PAGE>
account specified in writing to the Trustee by Trendwest 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 Trendwest transfers the receivable related to an
Upgrade Contract to the Issuer to be included in the 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 1999-1
(the "Notes") issued pursuant to the Indenture are secured by certain
Receivables and other Collateral described in the Indenture. The Trust Estate
relating to the Notes also secures the payment of certain other amounts and
certain other obligations as described in the Indenture. Until the Notes are
paid in full and the obligations of the Issuer under the Indenture are
satisfied, (i) the Subordinated Notes are payable only at the time and in the
manner provided in the Indenture and are not redeemable or prepayable at the
option of the 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 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 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 Notes Outstanding under the Indenture. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes, at the time Outstanding
under the Indenture, 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 Notes Outstanding.
No reference herein to the Indenture and no provision of this
Subordinated Note or of the Indenture 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 are Outstanding,
solely from the Collateral pledged to the Trustee under the Indenture with
respect to the Notes at the times, place and rate, and in the coin or currency,
herein prescribed.
<PAGE>
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 are Outstanding, Trendwest 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 III, Inc. has caused this Subordinated
Note to be signed, manually, by its ______________________.
TRI FUNDING III, INC.
By
Name:
Title:
<PAGE>
SCHEDULE I
CONTRACT SCHEDULE
Exhibit 10.45
INDENTURE
among
TRI FUNDING III, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
("Trustee")
Dated as of August 1, 1999
Providing for
$26,000,000 6.695% Receivables-Backed Notes, Series 1999-1, Class
A-1 $22,500,000 7.230% Receivables-Backed Notes, Series 1999-1,
Class A-2 $55,904,000 7.560% Receivables-Backed Notes, Series
1999-1, Class A-3 $18,249,000 7.460% Receivables-Backed Notes,
Series 1999-1, Class B $19,947,000 7.685% Receivables-Backed
Notes, Series 1999-1, Class C $17,400,000 8.590%
Receivables-Backed Notes, Series 1999-1, Class D
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
Parties...........................................................................................................1
Preliminary Statement.............................................................................................1
Granting Clause...................................................................................................1
ARTICLE ONE DEFINITIONS............................................................................2
Section 1.01 Definitions............................................................................2
ARTICLE TWO NOTE FORM.............................................................................22
Section 2.01 Form22
ARTICLE THREE THE NOTES.............................................................................22
Section 3.01 Denomination..........................................................................22
Section 3.02 Execution, Authentication, Delivery and Dating........................................22
Section 3.03 Notes as Debt.........................................................................23
Section 3.04 Registration, Registration of Transfer and Exchange...................................23
Section 3.05 Limitation on Transfer and Exchange...................................................24
Section 3.06 Mutilated, Destroyed, Lost or Stolen Notes............................................24
Section 3.07 Payment of Principal and Interest; Principal and Interest Rights
Preserved.........................................................................25
Section 3.08 Persons Deemed Owner..................................................................27
Section 3.09 Cancellation..........................................................................27
Section 3.10 Book-Entry Registration of Class A Notes, Class B Notes, Class C Notes
and Class D Notes.................................................................27
Section 3.11 Notice to Clearing Agency.............................................................28
Section 3.12 Definitive Notes......................................................................29
ARTICLE FOUR ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF COLLATERAL...............................30
Section 4.01 Conditions to Original Issuance of Notes..............................................30
Section 4.02 Security for Notes....................................................................32
Section 4.03 Substitution and Purchase of Receivables; Upgrade Contracts...........................33
Section 4.04 Releases..............................................................................34
Section 4.05 Trust Estate..........................................................................35
Section 4.06 Notice of Release.....................................................................35
Section 4.07 Opinions as to Trust Estate...........................................................35
<PAGE>
ARTICLE FIVE SATISFACTION AND DISCHARGE............................................................36
Section 5.01 Satisfaction and Discharge of Indenture...............................................36
ARTICLE SIX DEFAULTS AND REMEDIES.................................................................37
Section 6.01 Events of Default.....................................................................37
Section 6.02 Acceleration of Maturity; Rescission and Annulment....................................38
Section 6.03 Collection of Indebtedness and Suits for Enforcement by Trustee.......................39
Section 6.04 Remedies..............................................................................40
Section 6.05 Optional Preservation of Trust Estate.................................................40
Section 6.06 Trustee May File Proofs of Claim......................................................41
Section 6.07 Trustee May Enforce Claims Without Possession of Notes................................41
Section 6.08 Application of Money Collected........................................................42
Section 6.09 Limitation on Suits...................................................................43
Section 6.10 Unconditional Right of Noteholders to Receive Principal and Interest..................44
Section 6.11 Restoration of Rights and Remedies....................................................44
Section 6.12 Rights and Remedies Cumulative........................................................44
Section 6.13 Delay or Omission; Not Waiver.........................................................45
Section 6.14 Control by Noteholders................................................................45
Section 6.15 Waiver of Past Defaults...............................................................45
Section 6.16 Undertaking for Costs.................................................................46
Section 6.17 Waiver of Stay or Extension Laws......................................................46
Section 6.18 Sale of Trust Estate..................................................................46
Section 6.19 Action on Notes.......................................................................47
ARTICLE SEVEN THE TRUSTEE...........................................................................48
Section 7.01 Certain Duties and Responsibilities...................................................48
Section 7.02 Notice of Default.....................................................................50
Section 7.03 Certain Rights of Trustee.............................................................50
Section 7.04 Not Responsible for Recitals or Issuance of Notes.....................................51
Section 7.05 May Hold Notes........................................................................52
Section 7.06 Money Held in Trust...................................................................52
Section 7.07 Compensation and Reimbursement........................................................52
Section 7.08 Corporate Trustee Required; Eligibility...............................................53
Section 7.09 Resignation and Removal; Appointment of Successor.....................................54
Section 7.10 Acceptance of Appointment by Successor................................................54
Section 7.11 Merger, Conversion, Consolidation or Succession to Business of Trustee................55
Section 7.12 Co-Trustees and Separate Trustees.....................................................55
<PAGE>
Section 7.13 Rights with Respect to the Servicer...................................................56
Section 7.14 Appointment of Authenticating Agent...................................................56
Section 7.15 Collateral Agent to Hold Contracts....................................................58
ARTICLE EIGHT RESERVED..............................................................................59
ARTICLE NINE SUPPLEMENTAL INDENTURES...............................................................59
Section 9.01 Supplemental Indentures Without Consent of Noteholders................................59
Section 9.02 Supplemental Indentures with Consent of Noteholders...................................60
Section 9.03 Execution of Supplemental Indentures..................................................61
Section 9.04 Effect of Supplemental Indentures.....................................................61
Section 9.05 Reference in Notes to Supplemental Indentures.........................................61
ARTICLE TEN REDEMPTION OF NOTES...................................................................62
Section 10.01 Redemption at the Option of the Issuer; Election to Redeem............................62
Section 10.02 Notice to Trustee.....................................................................62
Section 10.03 Notice of Redemption by the Issuer....................................................62
Section 10.04 Deposit of the Redemption Price.......................................................63
Section 10.05 Notes Payable on Redemption Date......................................................63
ARTICLE ELEVEN REPRESENTATIONS, WARRANTIES AND COVENANTS.............................................63
Section 11.01 Representations and Warranties........................................................63
Section 11.02 Covenants.............................................................................67
Section 11.03 Other Matters as to the Issuer........................................................74
ARTICLE TWELVE ACCOUNTS AND ACCOUNTINGS..............................................................74
Section 12.01 Collection of Money...................................................................74
Section 12.02 Collection Account....................................................................74
Section 12.03 Reserve Account.......................................................................80
Section 12.04 Prefunding Account....................................................................81
Section 12.05 Capitalized Interest Account..........................................................82
Section 12.06 Reports by Trustee to Noteholders.....................................................84
ARTICLE THIRTEEN PROVISIONS OF GENERAL APPLICATION.....................................................85
Section 13.01 Acts of Noteholders...................................................................85
Section 13.02 Notices, etc., to Trustee, Issuer, Servicer and the Rating Agencies...................85
Section 13.03 Notices and Other Documents to Noteholders; Waiver....................................86
Section 13.04 Effect of Headings and Table of Contents..............................................87
Section 13.05 Successors and Assigns................................................................87
Section 13.06 Separability..........................................................................87
<PAGE>
Section 13.07 Benefits of Indenture.................................................................87
Section 13.08 Legal Holidays........................................................................87
Section 13.09 Governing Law.........................................................................87
Section 13.10 Counterparts..........................................................................88
Section 13.11 Obligation............................................................................88
Section 13.12 Compliance Certificates and Opinions..................................................88
Section 13.13 Effective Date of Transactions........................................................89
Section 13.14. Parties will Not Institute Insolvency Proceedings.....................................89
Signatures.......................................................................................................90
</TABLE>
<PAGE>
EXHIBIT A Form of Investment Letter
EXHIBIT B Form of Supplement for Grant of Substitute Contracts and
Upgrade Contracts
EXHIBIT C-1 Form of Class A-1 Note
EXHIBIT C-2 Form of Class A-2 Note
EXHIBIT C-3 Form of Class A-3 Note
EXHIBIT C-4 Form of Class B Note
EXHIBIT C-5 Form of Class C Note
EXHIBIT C-6 Form of Class D Note
Exhibit D Note Owner Certificate
SCHEDULE A Contract Schedule
SCHEDULE B Targeted Principal Balance Schedule
<PAGE>
INDENTURE, dated as of August 1, 1999 (herein, as amended and
supplemented from time to time as permitted hereby, called this "Indenture"),
among TRI FUNDING III, 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 NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as trustee (the
"Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Issuer's 6.695% Receivables-Backed
Notes, Series 1999-1, Class A-1 (the "Class A-1 Notes"), its 7.230%
Receivables-Backed Notes, Series 1999-1, Class A-2 (the "Class A-2 Notes"), its
7.560% Receivables-Backed Notes, Series 1999-1, Class A-3 (the "Class A-3 Notes"
and, together with the Class A-1 Notes and the Class A-2 Notes, the "Class A
Notes"), its 7.460% Receivables-Backed Notes, Series 1999-1, Class B (the "Class
B Notes"), its 7.685% Receivables-Backed Notes, Series 1999-1, Class C (the
"Class C Notes"), and its 8.590% Receivables-Backed Notes, Series 1999-1, Class
D (the "Class D Notes") and together with the Class A Notes, the Class B Notes
and the Class C Notes, the "Notes"). 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 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 ratable benefit of the Holders of each
Class of Notes, respectively, 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 and Contracts,
including all proceeds of the Contracts and Receivables and all payments
received on or with respect to the Contracts and Receivables and due after the
applicable Cut-Off Date; (b) the Contract Files and the Collateral Agent Files;
(c) the related Vacation Credits; (d) the Receivables Purchase Agreement; (e)
the Servicing Agreement; (f) the Collateral Agent Agreement; (g) all amounts
from time to time on deposit in
1
<PAGE>
the Capitalized Interest Account, the Collection Account, the Local
Bank Account, the Prefunding Account and the Reserve Account (including any
Eligible Investments and other property in such accounts); and (h) 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 being hereinafter referred to as the
"Collateral" or "Trust Estate"). The Trust Estate will include the Issuer's
interest in Subsequent Contracts and the related Receivables and a security
interest in the related Vacation Credits but will not include the Contracts that
are released from the lien of the Trustee on each Payment Date pursuant to the
terms of this Indenture.
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": As of any date, the sum of the aggregate
of the Collateral Values outstanding at such date; provided, however, that the
Collateral Value of any Defaulted
2
<PAGE>
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.
"Authenticating Agent": Any entity appointed by the Trustee pursuant to
Section 7.14 hereof, which initially shall be the Trustee.
"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.
"Book-Entry Class A Notes": Book-Entry Class A-1 Notes, Book-Entry
Class A-2 Notes or Book-Entry Class A-3 Notes, as applicable.
"Book-Entry Class A-1 Notes": Beneficial interests in the Class A-1
Notes, the ownership and transfers of which shall be made through book entries
by a Clearing Agency as described in Section 3.10.
"Book-Entry Class A-2 Notes": Beneficial interests in the Class A-2
Notes, the ownership and transfers of which shall be made through book entries
by a Clearing Agency as described in Section 3.10.
"Book-Entry Class A-3 Notes": Beneficial interests in the Class A-3
Notes, the ownership and transfers of which shall be made through book entries
by a Clearing Agency as described in Section 3.10.
"Book-Entry Class B Notes": Beneficial interests in the Class B Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.10.
"Book-Entry Class C Notes": Beneficial interests in the Class C Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.10.
"Book-Entry Class D Notes": Beneficial interests in the Class D Notes,
the ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 3.10.
3
<PAGE>
"Business Day": Any day other than a Saturday, a Sunday or a day on
which banking institutions in New York City, the State of Maryland 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.
"Capitalized Interest Account": The account or accounts with that name
created and maintained pursuant to Section 12.05 hereof.
"Cede & Co.": The initial registered holder of the Class A Notes, the
Class B Notes, the Class C Notes and the Class D Notes, acting as nominee of The
Depository Trust Company.
"Class": Any of the Class A Notes, the Class B Notes, the Class C Notes
or the Class D Notes.
"Class A Note Owner": With respect to a Book-Entry Class A Note, the
Person who is the beneficial owner of such Book-Entry Class A Note as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
accordance with the rules of such Clearing Agency).
"Class A Notes": The definition set forth in the Preliminary Statement.
"Class A Principal Distribution Amount": With respect to each Payment
Date (a) prior to Stated Maturity and (i) not during a Trigger Event Period, an
amount equal to the lesser of (A) the amount necessary to reduce the principal
balance of the Class A Notes to the Targeted Credit Enhancement Level with
respect to such Class and such Payment Date and (B) the amount available in the
Collection Account from the related Due Period after the payment of the amounts
set forth in clauses (i)-(vii) of Section 12.02(d); provided, however, the
amount in clauses (a)(i) shall be paid first to the holders of the Class A-1
Notes until the Class A-1 Notes are paid in full, then to the holders of the
Class A-2 Notes until the Class A-2 Notes are paid in full, then to the holders
of the Class A-3 Notes until the Class A-3 Notes are paid in full; and (ii)
during a Trigger Event Period, the amount in the Collection Account from the
related Due Period after the payment of the amounts set forth in clauses
(i)-(vii) of Section 12.02(e) until the Class A Notes have been paid in full;
and (b) at Stated Maturity, an amount equal to the aggregate principal amount of
Class A Notes Outstanding as of such date.
"Class A Supplemental Principal Distribution Amount": With respect to
each Payment Date on and after the Payment Date occurring in September, 2002 and
not during a Trigger Event Period, an amount equal to the lesser of (i) the
amount necessary to reduce the principal balance of the Class A Notes to the
Targeted Principal Balance with respect to the Class A Notes and such Payment
Date, and (ii) the amount available in the Collection Account from the related
Due Period after the payment of the amounts set forth in clauses (i)-(xii) of
Section 12.02(d). Prior to the Payment Date occurring in September, 2002, the
Class A Supplemental Principal Distribution Amount shall equal zero.
4
<PAGE>
"Class A-1 Note Rate": The rate at which interest accrues on the Class
A-1 Notes, which rate shall be equal to 6.695% per annum.
"Class A-1 Noteholder": Cede & Co. or a holder of a Definitive Class
A-1 Note.
"Class A-1 Notes": The definitions set forth in the Preliminary
Statement.
"Class A-2 Note Rate": The rate at which interest accrues on the Class
A-2 Notes, which rate shall be equal to 7.230% per annum.
"Class A-2 Noteholder": Cede & Co. or a holder of a Definitive Class
A-2 Note.
"Class A-2 Notes": The definition set forth in the Preliminary
Statement.
"Class A-3 Note Rate": The rate at which interest accrues on the Class
A-3 Notes, which rate shall be equal to 7.560% per annum.
"Class A-3 Noteholder": Cede & Co. or a holder of a Definitive Class
A-3 Note.
"Class A-3 Notes": The definition set forth in the Preliminary
Statement.
"Class B Noteholder": Cede & Co. or a holder of a Definitive Class B
Note.
"Class B Note Owner": With respect to a Book-Entry Class B Note, the
Person who is the beneficial owner of such Book-Entry Class B Note as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
accordance with the rules of such Clearing Agency).
"Class B Note Rate": The rate at which interest accrues on the Class B
Notes, which rate shall be equal to 7.460% per annum.
"Class B Notes": The definition set forth in the Preliminary Statement.
"Class B Principal Distribution Amount": With respect to each Payment
Date (a) prior to Stated Maturity and (i) not during a Trigger Event Period, an
amount equal to the lesser of (A) the amount necessary to reduce the principal
balance of the Class B Notes to the Targeted Credit Enhancement Level with
respect to such Class and such Payment Date and (B) the amount available in the
Collection Account from the related Due Period after the payment of the amounts
set forth in clauses (i)-(viii) of Section 12.02(d); and (ii) during a Trigger
Event Period, the amount in the Collection Account from the related Due Period
after the payment of the amounts set forth in clauses (i)-(viii) of Section
12.02(e) until the Class B Notes have been paid in full;
5
<PAGE>
and (b) at Stated Maturity, an amount equal to the aggregate principal
amount of Class B Notes Outstanding as of such date.
"Class B Supplemental Principal Distribution Amount": With respect to
each Payment Date on and after the Payment Date occurring in September, 2002 and
not during a Trigger Event Period, an amount equal to the lesser of (i) the
amount necessary to reduce the principal balance of the Class B Notes to the
Targeted Principal Balance with respect to the Class B Notes and such Payment
Date and (ii) the amount available in the Collection Account from the related
Due Period after the payment of the amounts set forth in clauses (i)-(xiii) of
Section 12.02(d). Prior to the Payment Date occurring in September, 2002, the
Class B Supplemental Principal Distribution Amount shall equal zero.
"Class C Noteholder": Cede & Co. or a holder of a Definitive Class C
Note.
"Class C Note Owner": With respect to a Book-Entry Class C Note, the
Person who is the beneficial owner of such Book-Entry Class C Note as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
accordance with the rules of such Clearing Agency).
"Class C Note Rate": The rate at which interest accrues on the Class C
Notes, which rate shall be equal to 7.685% per annum.
"Class C Notes": The definition set forth in the Preliminary Statement.
"Class C Principal Distribution Amount": With respect to each Payment
Date (a) prior to Stated Maturity and (i) not during a Trigger Event Period, an
amount equal to the lesser of (A) the amount necessary to reduce the principal
balance of the Class C Notes to the Targeted Credit Enhancement Level with
respect to such Class and such Payment Date and (B) the amount available in the
Collection Account from the related Due Period after the payment of the amounts
set forth in clauses (i)-(ix) of Section 12.02(d); and (ii) during a Trigger
Event Period, the amount in the Collection Account from the related Due Period
after the payment of the amounts set forth in clauses (i)-(ix) of Section
12.02(e) until the Class C Notes have been paid in full; and (b) at Stated
Maturity, an amount equal to the aggregate principal amount of Class C Notes
Outstanding as of such date.
"Class C Supplemental Principal Distribution Amount": With respect to
each Payment Date on and after the Payment Date occurring in September, 2002 and
not during a Trigger Event Period, an amount equal to the lesser of (i) the
amount necessary to reduce the principal balance of the Class C Notes to the
Targeted Principal Balance with respect to the Class C Notes and such Payment
Date and (ii) the amount available in the Collection Account from the related
Due Period after the payment of the amounts set forth in clauses (i)-(xiv) of
Section 12.02(d). Prior to the Payment Date occurring in September, 2002, the
Class C Supplemental Principal Distribution Amount shall equal zero.
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"Class D Noteholder": Cede & Co. or a holder of a Definitive Class D
Note.
"Class D Note Owner": With respect to a Book-Entry Class D Note, the
Person who is the beneficial owner of such Book-Entry Class D Note as reflected
on the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly or as an indirect participant, in
accordance with the rules of such Clearing Agency).
"Class D Note Rate": The rate at which interest accrues on the Class D
Notes, which rate shall be equal to 8.590% per annum.
"Class D Notes": The definition set forth in the Preliminary Statement.
"Class D Principal Distribution Amount": With respect to each Payment
Date (a) prior to Stated Maturity and (i) not during a Trigger Event Period, an
amount equal to the lesser of (A) the amount necessary to reduce the principal
balance of the Class D Notes to the Targeted Credit Enhancement Level with
respect to such Class and such Payment Date and (B) the amount available in the
Collection Account from the related Due Period after the payment of the amounts
set forth in clauses (i)-(x) of Section 12.02(d); and (ii) during a Trigger
Event Period, the amount in the Collection Account from the related Due Period
after the payment of the amounts set forth in clauses (i)-(x) of Section
12.02(e) until the Class D Notes have been paid in full; and (b) at Stated
Maturity, an amount equal to the aggregate principal amount of Class D Notes
Outstanding as of such date.
"Class D Supplemental Principal Distribution Amount": With respect to
each Payment Date on and after the Payment Date occurring in September, 2002 and
not during a Trigger Event Period, an amount equal to the lesser of (i) the
amount necessary to reduce the principal balance of the Class D Notes to the
Targeted Principal Balance with respect to the Class D Notes and such Payment
Date and (ii) the amount available in the Collection Account from the related
Due Period after the payment of the amounts set forth in clauses (i)-(xv) of
Section 12.02(d). Prior to the Payment Date occurring in September, 2002, the
Class D Supplemental Principal Distribution Amount shall equal zero.
"Clearing Agency": An organization registered as a "clearing agency"
pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.
"Clearing Agency Participant": A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date": August 25, 1999, the date that the Transaction
Documents are originally executed and delivered by the parties thereto.
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"Club" or "WorldMark": WorldMark, the Club, a California mutual benefit
corporation, and its successors in interest.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral": The meaning specified in the Granting Clause of this
Indenture.
"Collateral Agent": Sage Systems, Inc., a Washington corporation, and
its permitted successors and assigns.
"Collateral Agent Agreement": The Collateral Agent Agreement, dated as
of August 1, 1999, by and among the Collateral Agent, the Servicer, the Issuer
and the Trustee, as amended and supplemented from time to time.
"Collateral Agent Files": The meaning set forth in the Receivables
Purchase Agreement.
"Collateral Value": With respect to each Receivable as of any date of
determination, the amount of principal outstanding with respect to such
Receivable at the end of such date (without giving effect to any write-off or
writedown of such Receivable).
"Collection Account": The account or accounts with that name with that
name created and maintained pursuant to Section 12.02 hereof.
"Contract Files": The meaning specified in the Receivables Purchase
Agreement.
"Contract Schedule": The listing of Contracts and Receivables on
Schedule A hereto as amended from time to time, which shall include with respect
to each Contract listed on such schedule: (a) its identifying number, (b) the
name and mailing address of the related Obligor, (c) the original number of
months to maturity, (d) the number of months to maturity as of the related
Cut-Off Date, (e) the interest rate of the Receivable, (f) its date of
origination, (g) the original principal balance, (h) the Collateral Value as of
the related Cut-Off Date, (i) the maturity date, (j) the monthly payment amount,
(k) the paid-through date, (l) the first payment date, (m) the date of sale, and
(n) the related number of Vacation Credits.
"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 Vacation Credits to the extent
specifically related to any such contract), which are acquired by the Issuer
from time to time pursuant to the Receivables Purchase Agreement and identified
on the Contract Schedule attached hereto as Schedule A, plus Substitute
Contracts, Subsequent Contracts and Upgrade Contracts, and any amendments,
riders and annexes thereto; provided
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that, from and after the date on which a Receivable relating to a
Contract is purchased or substituted by the Issuer or Trendwest in accordance
with Section 4.03 hereof or released pursuant to Section 4.04 hereof, such
Contract shall no longer constitute a "Contract" for purposes of the Transaction
Documents.
"Controlling Class": The Class A Notes until the Class A Notes are paid
in full, then the Class B Notes until the Class B Notes are paid in full, then
the Class C Notes until the Class C Notes are paid in full, then the Class D
Notes.
"Corporate Trust Office": The principal corporate trust office of the
Trustee located at Sixth Street and Marquette Avenue, MAC N9311-161,
Minneapolis, MN 55479, or at such other address as the Trustee may designate
from time to time by notice to the Noteholders, the Servicer and the Issuer, or
the principal corporate trust office of any successor Trustee.
"Cut-Off Date": With respect to Contracts pledged to the Trustee on the
Closing Date, the Initial Cut-Off Date, with respect to each Subsequent
Contract, the related Subsequent Cut-Off Date, and with respect to any
Substitute Contract or Upgrade Contract, the date on which such Contract is
pledged to the Trustee by the Issuer.
"DCR": Duff & Phelps Credit Rating Co. and its successors in interest.
"Default": Any occurrence or circumstance which with notice or the
lapse of time or both would become an Event of Default.
"Default Rate": For any Due Period, the sum of the Collateral Values as
of the Calculation Date occurring in such Due Period of all Contracts that
became Defaulted Contracts in such Due Period and remained Defaulted Contracts
as of the end of business on such Calculation Date divided by the Aggregate
Collateral Value on the Calculation Date immediately preceding such Due Period.
"Defaulted Contract": The Contract related to a Defaulted Receivable.
"Defaulted Receivable": A Receivable shall become a Defaulted
Receivable at the earliest of (i) the date on which the Servicer receives notice
that the related Obligor has (or, if a Receivable 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 Receivable 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
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such Receivable will not be paid (for reasons other than disputes of
amounts owed with respect to such Receivable).
"Definitive Class A-1 Note": A definitive, fully registered Class A-1
Note issued pursuant to Section 3.10.
"Definitive Class A-2 Note": A definitive, fully registered Class A-2
Note issued pursuant to Section 3.10.
"Definitive Class A-3 Note": A definitive, fully registered Class A-3
Note issued pursuant to Section 3.10.
"Definitive Class B Note": A definitive, fully registered Class B Note
issued pursuant to Section 3.10.
"Definitive Class C Note": A definitive, fully registered Class C Note
issued pursuant to Section 3.10.
"Definitive Class D Note": A definitive, fully registered Class D Note
issued pursuant to Section 3.10.
"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.
"Delivery Date": The date on which a Note is issued in accordance with
this Indenture.
"Depository Agreement": The letter of representations, between the
Issuer and the Depository Trust Company, as Clearing Agency.
"Determination Date": The fifth day preceding each Payment Date or, if
such day is not a Business Day, the preceding Business Day.
"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; provided,
however, that the initial Due Period shall be the period from and including July
1, 1999 through August 31, 1999.
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"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
F1 by Fitch and D-1 by DCR (or, if not rated by Fitch and DCR, 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 the highest short term unsecured debt rating of
Fitch and DCR, (or, if not rated by Fitch and DCR, 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 and DCR (or,
if not rated by Fitch and DCR, 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
and DCR (or, if not rated by Fitch and DCR, 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 and DCR (or, if not rated by Fitch and DCR, an
equivalent rating from S&P or Moody's) at the time of such investment;
and
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(vi) money market funds having ratings in the highest
available rating category of Fitch and DCR (or if not rated by Fitch
and DCR, an equivalent rating from S&P or Moody's) at the time of such
investment (any such money market funds which provide for demand
withdrawals being conclusively deemed to satisfy any maturity
requirements for Eligible Investments set forth herein), including
money market funds of the Trustee and any such funds that are managed
by the Trustee or any of its Affiliates or for which the Trustee or any
Affiliate of the Trustee acts as advisor.
Any Eligible Investments may be purchased by or through the Trustee or any of
its Affiliates.
"Eligible Receivable": All Receivables, including Subsequent
Receivables, that are not more than 90 day delinquent as of the close of
business on the related Calculation Date.
"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 any Class, the date on which the
final principal payment on the Notes of such Class 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
Contracts, the Receivables or of any other instrument shall include all rights,
powers and options (but none of the obligations) of the Granting party
thereunder, including, without limitation, the immediate and continuing right to
claim, collect, receive and receipt for payments in respect of the 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.
"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
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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": $163,540,953.49.
"Initial Cut-Off Date": The close of business on June 30, 1999.
"Initial Payment Date": September 15, 1999, the first Payment Date
following the Closing Date.
"Initial Purchaser": Prudential Securities Incorporated.
"Interest Shortfall Payment": The definition set forth in Section
3.07(a).
"Issuer": TRI Funding III, 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.
"Local Bank": The meaning specified in the Servicing Agreement.
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"Local Bank Account": The meaning specified in the Servicing Agreement.
"Monthly Servicer's Report": 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": The notes authenticated and delivered under this
Indenture.
"Note Owner": A Class A Note Owner, Class B Note Owner, Class C Note
Owner or Class D Owner, as the case may be.
"Note Owner Certificate": The certificate of a Note Owner or transferee
thereof attached as Exhibit D hereto.
"Note Purchase Agreement": The Note Purchase Agreement, dated as of
August 18, 1999, among the Issuer, Trendwest, TW Holdings, TW Holdings II, TRI
I, TRI II and the Initial Purchaser.
"Note Rate": The Class A-1 Note Rate, the Class A-2 Note Rate, the
Class A-3 Note Rate, the Class B Note Rate, the Class C Note Rate or the Class D
Note Rate, as applicable.
"Note Register" and "Note Registrar": The respective meanings specified
in Section 3.04 hereof.
"Noteholder" or "Holder": The Person in whose name a Note is registered
in the Note Register.
"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 on behalf of the Issuer.
"Opinion of Counsel": A written opinion of counsel who may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer and
who shall be reasonably satisfactory to the Trustee and which opinion shall
comply with the applicable requirements of Section 13.12 hereof.
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"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 such Notes which the Trustee knows to be so owned shall be so
disregarded.
"Overdue Interest": The meaning set forth in Section 3.07(a).
"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 11.15(o) hereof to pay the
principal of, or interest on, any Notes on behalf of the Issuer.
"Payment Date": 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.
"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.
"Prefunding Account": The account or accounts by that name established
and maintained by the Trustee pursuant to Section 12.04.
"Prefunding Period": The period beginning on the Closing Date and
ending on the Pre-Funding Period Termination Date.
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"Prefunding Period Termination Date": The first to occur of the
following: (a) the close of business on September 30, 1999, (b) the Payment Date
on which the amount on deposit in the Prefunding Account is less than $10,000
and (c) the date on which a Trigger Event occurs.
"Principal Distribution Amount": The Class A Principal Distribution
Amount, the Class B Principal Distribution Amount, the Class C Principal
Distribution Amount or the Class D Principal Distribution Amount, as applicable.
"Proceeding": Any suit in equity, action at law or other judicial or
administrative proceeding.
"Purchase and Substitution Limit": 13% of the aggregate Collateral
Values of all Receivables pledged by the Issuer to the Trustee on the Prefunding
Period Termination Date, measured as of their related Cut-Off Dates.
"Purchase Price": With respect to any Contract or interest therein
repurchased by the Issuer or Trendwest, as the case may be, pursuant to Section
3.03 of the Receivables Purchase Agreement, Section 4.03 hereof or Section
3.10(b) of the Servicing Agreement, the sum of (i) the Collateral Value of the
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": Each of DCR and Fitch.
"Receivables": With respect to any Contract, all of, and the right to
receive all of (i) the Scheduled Payments, (ii) any Residual Proceeds, (iii) any
Recoveries and (iv) any Servicing Charges.
"Receivables Purchase Agreement": The Receivables Purchase Agreement,
dated as of August 1, 1999, by and among TRI I, TRI II, Trendwest, TW Holdings,
TW Holdings II and the Issuer, as amended and supplemented from time to time,
together with the Asset Assignment and each Subsequent Asset Assignment executed
in connection therewith.
"Record Date": With respect to any Payment Date, the close of business
on the last day of the related Due Period, whether or not a Business Day, except
with respect to the Initial Payment Date for the Notes, the Record Date shall be
the 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 Vacation 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
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reduced by any reasonably incurred out-of-pocket expenses incurred by
the Servicer in enforcing such Defaulted Contract.
"Redemption Date": 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 Note Rate (exclusive of
installments of interest and principal maturing on or prior to the 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": Any interest or other earnings earned on all or
part of the Trust Estate.
"Releasable Receivable": With respect to any Payment Date not occurring
during a Trigger Event Period and for which the principal balance of each Class
of Notes has been reduced to the Targeted Credit Enhancement Level for such
Class and Payment Date and the amount in the Reserve Account is equal to or
greater than the Reserve Account Required Balance, any Defaulted Receivable and
any Receivable that is more than 90 days delinquent.
"Remittance Date": The Business Day immediately preceding each Payment
Date.
"Reserve Account": The trust account created and maintained pursuant to
Section 12.03 hereof.
"Reserve Account Required Balance": As of any Payment Date, an amount
equal to the greater of (i) $800,000 and (ii) the product of (a) 3.0% and (b)
the principal balance of the Notes Outstanding as of such Payment Date (after
any distributions made pursuant to Section 12.02, on such date).
"Residual Proceeds": With respect to a Contract that is not a Defaulted
Contract and the related Vacation Credits, the net proceeds of any resale or
other disposition of such Vacation Credits.
"Responsible Officer": When used with respect to the Trustee, any
officer assigned to the Corporate Trust Department (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, Assistant
Secretary or any other officer of the Trustee
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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.
"S&P": Standard & Poor's Ratings Group, a division of The McGraw-Hill
Companies, Inc., and its successors in interest.
"Sale": The meaning specified in Section 6.18 hereof.
"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.
"Servicer": Initially, Trendwest Resorts, Inc., an Oregon corporation,
and any successor Servicer appointed pursuant to Section 6.02 of the Servicing
Agreement.
"Servicer Fee": On each Payment Date, an amount equal to the product of
(i) one-twelfth of 1.0% and (ii) the Aggregate Collateral Value at the close of
business on the related Calculation Date.
"Servicing Agreement": The Servicing Agreement, dated as of August 1,
1999, by and among the Issuer, the Servicer 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 the Commonwealth of Puerto Rico.
"Stated Maturity": August 15, 2010.
"Subordinated Note": The subordinated note dated as of the Closing
Date, made by the Issuer to Trendwest as a part of Acquisition Consideration and
the payments of which are subordinated by its terms to distributions made
pursuant to clauses (i)-(xvii) of Section 12.02(d) and clauses (i)-(xi) of
Section 12.02(e). The form of the Subordinated Note is attached to the
Receivables Purchase Agreement as Exhibit D.
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"Subsequent Contract": A Contract which Trendwest sells to the Issuer
and the Issuer pledges to the Trustee in connection with a draw on the
Prefunding Account.
"Subsequent Cut-Off Date": With respect to any Subsequent Contract, the
last day of the Due Period immediately preceding the related Subsequent Transfer
Date.
"Subsequent Transfer Date": Each date during the Prefunding Period,
which must be a Business Day, on which one or more of Trendwest, TRI I or TRI II
sell to the Issuer and the Issuer pledges Subsequent Contracts to the Trustee
hereunder.
"Substitute Contract": The meaning specified in the Receivables
Purchase Agreement.
"Substitute Receivable": The meaning specified in the Receivables
Purchase Agreement.
"Supplemental Principal Distribution Amount": With respect to the Class
A Notes, the Class A Supplemental Principal Distribution Amount, with respect to
the Class B Notes, the Class B Supplemental Principal Distribution Amount, with
respect to the Class C Notes, the Class C Supplemental Principal Distribution
Amount, and with respect to the Class D Notes, the Class D Supplemental
Principal Distribution Amount.
"Targeted Credit Enhancement Level": With respect to the Class A Notes,
38.50%, with respect to the Class B Notes, 27.75%, with respect to the Class C
Notes, 16.00%, and with respect to the Class D Notes, 5.75% of the sum of (a)
amounts remaining in the Prefunding Account after distributions on such Payment
Date and (b) the Aggregate Collateral Value of all Eligible Receivables as of
the close of business on the related Calculation Date or, with respect to any
Contracts added after the related Calculation Date and prior to such Payment
Date, as of the related Cut-Off Date.
"Targeted Principal Balance": With respect to the Class A Notes, the
Class B Notes, the Class C Notes and Class D Notes and each Payment Date, the
amount set forth on Schedule B attached hereto.
"TFI": Trendwest Funding I, Inc., the independent member of TRI I, and
its successors in interest.
"Transaction Documents": This Indenture, the Note Purchase Agreement,
the Servicing Agreement, the Receivables Purchase Agreement, the Collateral
Agent Agreement and the Notes.
"Trendwest": Trendwest Resorts, Inc., an Oregon corporation, and its
permitted successors and assigns.
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"TRI I": TRI Funding Company I, L.L.C. and its successors in interest.
"TRI II": TRI Funding II, Inc. and its successors in interest.
"Trigger Event": Any of the following events or conditions: (1) if, as
of any Calculation Date, the aggregate Collateral Value of the Receivables that
are more than 60 days delinquent, as of each related Calculation Date for the
preceding three Due Periods is greater than or equal to 6% of the Aggregate
Collateral Value as of the related Calculation Date; (2) if, as of any
Calculation Date, the aggregate Collateral Value of Defaulted Receivables that
became Defaulted Receivables in the related Due Period is greater than or equal
to 0.80% of the Aggregate Collateral Value as of the related Calculation Date;
(3) the aggregate Collateral Value of the Receivables that became Defaulted
Receivables is greater than or equal to 17% of the aggregate Collateral Value of
Receivables pledged to the Trustee on the Prefunding Period Termination Date,
measured as of their respective Cut-Off Dates; (4) an Event of Default or
Servicer Event of Default has occurred and is continuing; (5) (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; (6) 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 Vacation Credits available for member use below 550,000,000; (7)
WorldMark exchanges one of its present properties for another property that is
worth fewer Vacation Credits than the property so exchanged; or (8) WorldMark
has interests in units at fewer than 24 developed resort properties.
"Trigger Event Period": Each period beginning on the Determination Date
following the day on which a Trigger Event occurs and ending on the last day of
the month in which no Trigger Event occurs or is continuing.
"Trustee": Norwest Bank Minnesota, National Association, a national
banking association until a successor Person shall have become the Trustee
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Person.
"Trust Estate": The meaning specified in the Granting Clause of this
Indenture.
"Trustee Fee": The fee payable on each Payment Date to the Trustee in
consideration for the Trustee's performance of its duties pursuant to this
Indenture as Trustee, in an amount equal to the product of (i) one-twelfth of
the Trustee Fee Rate and (ii) the aggregate principal
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amount of Outstanding Notes 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).
"Trustee Fee Rate": 0.0325% per annum.
"TW Holdings": TW Holdings, Inc., a Nevada corporation, and its
permitted successors and assigns.
"TW Holdings II": TW Holdings II, Inc., a Delaware 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.
"Unreimbursed Servicing Transfer Payments": With respect to any
transfer of servicing by the Servicer, any costs or expenses of the Trustee, to
the extent not reimbursed by the Servicer or a third-party, including, without
limitation, any costs or expenses associated with the complete transfer of all
servicing data and the completion, correction or manipulation of such servicing
data as may be required by the Trustee to correct any errors or insufficiencies
in the servicing data or otherwise to enable the Trustee to service the
Receivables properly and effectively.
"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 Vacation 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. Each Upgrade
Contract shall be pledged to the Trustee pursuant to Section 4.03(g) hereof.
"Vacation Credits": The vacation credits financed by an Obligor
pursuant to a Contract.
"Vice President": With respect to a member of 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 mutual
benefit corporation, and its successors in interest.
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ARTICLE TWO
NOTE FORM
Section 2.01 Form. The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class B Notes, the Class C Notes and the Class D Notes, together
with the certificates of authentication, shall be in substantially the form set
forth in Exhibits C-1, C-2, C-3, C-4, C-5 and C-6, respectively, hereto, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed
thereon, as may, 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 the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class B Notes, the
Class C Notes and the Class D Notes which may be authenticated and delivered
under this Indenture is limited to an aggregate principal amount of $26,000,000,
$22,500,000, $55,904,000, $18,249,000, $19,947,000 and $17,400,000, respectively
(except for Notes authenticated and delivered upon registration of transfer or
in exchange for or in lieu of, other Notes pursuant to Sections 3.03, 3.04, 3.06
or 9.05 hereof). The Notes shall be issuable only as registered Notes without
coupons in the denominations of at least $250,000; 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 outstanding principal amount
of less than $250,000.
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
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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, the Issuer, the Servicer, the Trustee and all Noteholders shall
treat the Notes 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. Norwest Bank Minnesota,
National Association, Sixth Street and Marquette Avenue, MAC N9311-161,
Minneapolis, MN 55479, 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, 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 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.
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(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 3.03 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 is not a general obligation of the Issuer, but is limited solely to
the amounts available out of the 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. If the Notes of any Class are no
longer held by The Depository Trust Company pursuant to Section 3.10, then the
restrictions set forth in this Section 3.05 shall apply to transfers of such
Notes. In such event, 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. 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.
The Trustee shall have no liability to the 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.
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, and
(ii) there is delivered to the Trustee such security or indemnity as may be
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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 and Stated
Maturity, bearing a number not contemporaneously outstanding. 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 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 shall bear interest on the unpaid principal
amount thereof at the applicable Note Rate (calculated on the basis of a 360-day
year consisting of 12 months of 30 days each), monthly from and including the
first day of each Due Period through the last day of such Due Period (except
with respect to the Initial Payment Date, from the Closing Date through August
31, 1999) and (to the extent that the payment of such interest shall be legally
enforceable) on any overdue installment of principal or interest (such overdue
interest and interest at the applicable Note Rate on such overdue interest, the
"Overdue 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 at the close of business on the
Payment Date immediately preceding such Payment Date or, with respect to
interest payable on the Initial
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Payment Date, on the principal amount of the Outstanding Notes on the 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. To the
extent that there is a shortfall in the amount available to pay the interest
owed on the Class A Notes, the amount of interest paid to the holders of each
such Class of Class A Notes shall be determined by multiplying the amount
available for such distribution by the ratio of the amount of interest
(including Overdue Interest) owed on such Class to the amount of interest
(including Overdue Interest) owed on all Classes of the Class A Notes (each such
amount with respect to each Class, the "Interest Shortfall Payment"). With
respect to the Notes of any Class, due but unpaid interest will accrue interest
at the related Note Rate.
(b) The principal of each Note shall be payable in installments ending
no later than the Stated Maturity of such Note 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. Payments of
principal on the Notes of each Class will be made on each Payment Date in an
amount equal to the sum of (a) the Principal Distribution Amount for such Class
and (b) on and after the Payment Date occurring on and after September, 2002,
the Supplemental Principal Distribution Amount for such Class and will be
applied to the Notes on a pro rata basis among the Notes of such Class,
commencing on the Initial Payment Date, provided, however, that with respect to
the Class A Notes prior to a Trigger Event Period, the Class A-2 Notes will not
be entitled to any payments of principal until the principal amount of the Class
A-1 Notes has been reduced to zero, and the Class A-3 Notes will not be entitled
to any payments of principal until the principal amount of the Class A-1 Notes
and Class A-2 Notes have been reduced to zero. The principal payable on the
Notes of each Class shall be paid (to the extent payable in accordance with the
terms hereof) on each Payment Date beginning on the Initial Payment Date and
ending on the Final Payment Date with respect to such Class on a pro rata basis
within each Class based upon the face amount of each Note of such Class;
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. 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
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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 12.05(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 Noteholder of any Note, such Note
shall be void, and such Noteholder shall use reasonable efforts to return such
Note 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.
Section 3.10 Book-Entry Registration of Class A Notes, Class B Notes,
Class C Notes and Class D Notes. Each of the Notes, upon original issuance,
shall be issued in the form of one or more typewritten Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes, Class B Notes, Class C Notes and Class D Notes,
respectively (the "Book-Entry Class A-1 Notes," the "Book-Entry Class A-2
Notes," the "Book-Entry Class A-3 Notes," the "Book-Entry Class B Notes," the
"Book-Entry Class C Notes," and the "Book-Entry Class D Notes," respectively),
to be delivered to The Depository Trust Company, the initial Clearing Agency, or
its agent by, or on behalf of, the Issuer. Each of the Class A Notes, Class B
Notes, Class C Notes and Class D Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of The Depository Trust Company,
as the initial Clearing Agency, and no Class A Note Owner, Class B Note Owner,
Class C Note Owner or Class D Owner will receive a definitive note representing
such Note Owner's interest in the Class A Notes, Class B Notes, Class C Notes or
Class D Notes, as the case may be, except as provided in Section 3.12. Unless
and until Definitive Class A-1 Notes and/or Definitive Class A-2 Notes and/or
Definitive Class A-3 Notes and/or Definitive Class B Notes and/or Definitive
Class C Notes and/or
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Definitive Class D Notes have been issued to the applicable Note Owners pursuant
to Section 3.12:
(a) the provisions of this Section 3.10 shall be in full
force and effect with respect to the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class B Notes, the Class C Notes or the
Class D Notes, as the case may be;
(b) the Issuer, the Servicer and the Trustee may deal with
the Clearing Agency and the Clearing Agency Participants for all
purposes with respect to the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class B Notes, the Class C Notes or the Class D
Notes, as the case may be, (including the making of distributions on
the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class B Notes, the Class C Notes and the Class D Notes, as the case may
be) as the authorized representatives of the respective Note Owners;
(c) to the extent that the provisions of this Section 3.10
conflict with any other provisions of this Indenture, the provisions of
this Section 3.10 shall control; and
(d) the rights of the respective Note Owners shall be
exercised only through the Clearing Agency and the Clearing Agency
Participants and shall be limited to those established by law and
agreements between such respective Note Owners and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the Depository
Agreement, unless and until Definitive Class A-1 Notes, Definitive
Class A-2 Notes, Definitive Class A-3 Notes, Definitive Class B Notes,
Definitive Class C Notes or Definitive Class D Notes, as the case may
be, are issued pursuant to Section 3.10, the initial Clearing Agency
will make book-entry transfers among the Clearing Agency Participants
and receive and transmit distributions of principal and interest on the
related Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class B
Notes, Class C Notes and Class D Notes, as the case may be, to such
Clearing Agency Participants.
For purposes of any provision of this Indenture requiring or permitting
actions with the consent of, or at the direction of, holders of Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class B Notes, Class C Notes or Class D Notes,
as the case may be, evidencing a specified percentage of the Outstanding
principal amount of the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class B Notes, the Class C Notes or the Class D Notes, respectively,
such direction or consent may be given by Note Owners (acting through the
Clearing Agency and the Clearing Agency Participants) owning Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class B Notes, Class C Notes or the Class D
Notes evidencing the requisite percentage of the Outstanding Principal Amount of
such Notes, respectively.
Section 3.11 Notice to Clearing Agency. Whenever notice or other
communication to the Class A Noteholders, the Class B Noteholders, the Class C
Noteholders or the Class D Noteholders is required under this Agreement, unless
and until Definitive Class A-1 Notes, Definitive Class A-2 Notes, Definitive
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Class A-3 Notes, Definitive Class A-3 Notes, Definitive Class B Notes,
Definitive Class C Notes or Definitive Class D Notes shall have been issued to
the related Note Owners pursuant to Section 3.10, the Trustee shall give all
such notices and communications specified herein to be given to such Noteholders
to the applicable Clearing Agency which shall give such notices and
communications to the related Class A Note Owners, Class B Note Owners, Class C
Note Owners and Class D Note Owners in accordance with its applicable rules,
regulations and procedures.
Section 3.12 Definitive Notes. If (a)(i) the Issuer advises the Trustee
in writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities under the Depository Agreement with respect to
any or all Classes and (ii) the Trustee or the Issuer is unable to locate a
qualified successor, (b) the Issuer, at its option, advises the Trustee in
writing that it elects to terminate the book-entry system with respect to any or
all Classes through the Clearing Agency or (c) after the occurrence of an Event
of Default, Class A Note Owners, Class B Note Owners, Class C Note Owners and
Class D Note Owners with respect to the Class A Notes, Class B Notes, Class C
Notes and Class D Notes evidencing not less than 50% of the aggregate unpaid
Outstanding principal amount of the Class A Notes, Class B Notes, Class C Notes
and Class D Notes, respectively, advise the Trustee and the Clearing Agency
through the Clearing Agency Participants in writing that the continuation of a
book-entry system with respect to the Class A Notes, Class B Notes, Class C
Notes or Class D Notes, respectively, through the Clearing Agency is no longer
in the best interests of the Class A Note Owners, Class B Note Owners, Class C
Note Owners or Class D Note Owners, as the case may be, the Trustee shall notify
all Class A Note Owners, Class B Note Owners, Class C Note Owners and Class D
Note Owners with respect to the Class A Notes, Class B Notes, Class C Notes and
Class D Notes Owners, respectively, through the Clearing Agency, of the
occurrence of any such event and of the availability of Definitive Class A
Notes, Definitive Class B Notes, Definitive Class C Notes or Definitive Class D
Notes, to Class A Note Owners, Class B Note Owners, Class C Note Owners and
Class D Note Owners, respectively, requesting the same. Upon surrender to the
Trustee of the Class A Notes, the Class B Notes, the Class C Notes or the Class
D Notes, as the case may be, by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Issuer shall execute
and the Trustee shall authenticate and deliver the Definitive Class A Notes,
Definitive Class B Notes, Definitive Class C Notes or Definitive Class D Notes,
as the case may be. Neither the Issuer nor the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such instructions. Upon the issuance of Definitive
Class A Notes, Definitive Class B Notes, Definitive Class C Notes or Definitive
Class D Notes, as the case may be, all references herein to obligations imposed
upon or to be performed by the Clearing Agency shall be deemed to be imposed
upon and performed by the Trustee, to the extent applicable with respect to such
Definitive Class A Notes, Definitive Class B Notes, Definitive Class C Notes and
Definitive Class D Notes, respectively, and the Trustee shall recognize the
holders of the Definitive Class A Notes as Class A Noteholders and/or holders of
the Definitive Class B Notes as Class B Noteholders and/or holders of the
Definitive Class C Notes as Class C Noteholders and/or holders of the Definitive
Class D Notes as Class D Noteholders hereunder.
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ARTICLE FOUR
ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF COLLATERAL
Section 4.01 Conditions to Original Issuance of Notes. (a) The Trustee
shall, upon receipt of an Issuer Order and upon the satisfaction of the
conditions set forth below, authenticate and deliver the Notes on the Closing
Date. The Outstanding Notes shall be equally and ratably entitled, with all
other Notes as provided herein, to the benefits of this Indenture without
preference, priority or distinction, except as set forth herein, all in
accordance with the terms and provisions of this Indenture.
(b) The obligation of the Trustee to authenticate, execute and deliver
the Notes is subject to the satisfaction of the following conditions:
(i) the Issuer shall have executed the Notes to be
authenticated and delivered on the Closing Date and shall have
delivered such Notes to the Trustee on or prior to the Closing Date;
(ii) the Issuer shall have delivered to the Collateral Agent
on or prior to the Closing Date the original executed counterpart of
each Contract (and the rest of the contents of the related Collateral
Agent File) identified in the Contract Schedule on the Closing Date,
and the Trustee shall have received a receipt from the Collateral Agent
evidencing such delivery;
(iii) the Issuer and the Servicer shall have delivered to the
Trustee on or prior to the Closing Date an Officer's Certificate dated
as of the 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
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 have been complied with;
(iv) each of the Issuer, TFI, TRI I, TRI II, TW Holdings, TW
Holdings II, the Collateral Agent and the Servicer shall have delivered
to the Trustee on or prior to the Closing Date a Board Resolution of
its board of directors authorizing, as applicable, the
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execution, delivery and performance of this Indenture and the other
Transaction Documents and the transactions contemplated hereby and
thereby, certified by an officer of such Person, as applicable;
(v) each of the Issuer, TFI, TRI I, TRI II, TW Holdings, TW
Holdings II, the Collateral Agent and the Servicer shall have delivered
to the Trustee on or prior to the Closing Date a copy of an officially
certified document, dated not more than 30 days prior to the Closing
Date, evidencing its due organization and good standing;
(vi) each of the Issuer, TFI, TRI I, TRI II, TW Holdings, TW
Holdings II, the Collateral Agent and the Servicer shall have delivered
to the Trustee on or prior to the Closing Date copies of its charter
and by-laws (or, with respect to TRI I, its Certificate of Formation
and its Limited Liability Company Agreement) 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 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 as secured party, and the Trust Estate as collateral; and
(b) with the Secretary of State of the States in which the chief
executive office of each of Trendwest, TW Holdings, TRI I, TRI II and
TW Holdings II 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 Closing Date a certificate listing the Servicing Officers
of the Servicer as of the Closing Date;
(ix) the Issuer shall have delivered to the Trustee on or
prior to the Closing Date an executed copy of the Servicing Agreement
and the Receivables Purchase Agreement and all amendments and
supplements thereto;
(x) Trendwest, TW Holdings, TRI I, TRI II and TW Holdings II
shall have delivered to the Trustee on or prior to the Closing Date an
executed copy of the Receivables Purchase Agreement and all amendments
and supplements thereto;
(xi) the Collateral Agent shall have delivered to the Trustee
on or prior to the Closing Date an Officer's Certificate dated as of
the Closing Date stating that (A) the execution, delivery and
performance of the Collateral Agent Agreement will not result in a
breach of any of the terms, conditions, provisions of, or constitute a
default under, the Collateral Agent'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
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any proceeding to which the Collateral Agent is a party or by which it
may be bound or to which it may be subject; and
(xii) Each of the Rating Agencies shall have delivered a letter
rating the Class A Notes, the Class B Notes and the Class C Notes at
least "AAA", "AA" and "A," respectively, and Fitch shall have delivered
a letter rating the Class D Notes at least "BBB."
(c) The obligation of the Trustee to accept the pledge of the
Subsequent Contracts on any Subsequent Transfer Date shall be subject to the
satisfaction of the following conditions:
(i) the Issuer shall have delivered to the Collateral Agent
on or prior to the applicable Subsequent Transfer Date the original
executed counterpart of each applicable Contract (and the rest of the
contents of the related Collateral Agent File) identified in the
schedule to the applicable Subsequent Asset Assignment on such
Subsequent Transfer Date, and the Trustee shall have received a receipt
from the Collateral Agent evidencing such delivery;
(ii) the Issuer and the Servicer shall have delivered to the
Trustee on or prior to the Closing Date an Officer's Certificate dated
as of such Subsequent Transfer 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 (B) that
all conditions precedent provided in this Indenture relating to the
pledge and delivery of the applicable Subsequent Contracts have been
complied with; and
(iii) none of the ratings from either Duff or Fitch, as
applicable shall have been reduced or withdrawn.
Section 4.02 Security for Notes. (a) Filing. The Issuer shall file
UCC-1 financing statements described in Section 4.01(b)(vii) hereof in
accordance with such Section 4.01(b)(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 Contracts and the Receivables and protect the Trustee's
interest in the related Vacation 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
Agencies 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 the Trust Estate.
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(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 the 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 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 in the
Receivables Purchase Agreement is incorrect and materially and adversely affects
the value of a Contract, the related Receivable or the related Vacation 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 the Receivables Purchase Agreement, then the
Issuer shall require Trendwest, pursuant to the Receivables Purchase Agreement,
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 Trendwest fails or is unable to cure such circumstance or
condition in accordance with the Receivables Purchase Agreement, then the Issuer
shall require Trendwest to substitute or purchase pursuant to the Receivables
Purchase Agreement, 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 Receivables Purchase Agreement. The Servicer shall deposit, or shall
cause to be deposited, into the Local Bank Account upon receipt of such amounts
by the Servicer pursuant to Section 3.03 of the Receivables Purchase Agreement.
(c) If the Issuer fails to enforce the purchase or substitution
obligation of Trendwest under 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 Receivable or Delinquent Receivable,
the Issuer shall be entitled to purchase the Contract related to such Contract
or to deliver a Substitute Contract meeting the same requirements as those
specified in Section 3.04 of the Receivables Purchase Agreement for
substitutions and purchases by Trendwest upon breaches of a representation or
warranty by Trendwest thereunder; provided, however, that the aggregate
Collateral Value of
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Defaulted Receivables and Substitute Contracts which are purchased or
substituted by the Issuer (measured as of the date of substitution) shall not
exceed the Purchase and Substitution Limit;
(e) The Issuer shall provide to the Trustee, or with respect to item
(ii) below the Collateral Agent, on the date of delivery of any Substitute
Contract the items listed in (i) and (ii) below.
(i) a supplement to the Receivables Purchase Agreement
substantially in the form of Annex A to the Receivables Purchase
Agreement and Exhibit B hereto, subjecting such Substitute Contract to
the provisions thereof and hereof 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
Collateral Agent 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 clause (xxi) of Section 12.02(d) or clause (xvi) of Section 12.02(e)
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 such clauses; 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 such Contract from Trendwest in exchange for the existing
Contract pursuant to Section 3.04(e) of the Receivables Purchase Agreement, then
the Servicer shall cause Trendwest to deliver such Upgrade Contract to the
Collateral Agent on behalf of the Issuer immediately upon execution by
Trendwest, WorldMark and the Obligor, and the Issuer shall pledge 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 Receivables Purchase
Agreement and Exhibit B hereto, subjecting such Upgrade Contract to the
provisions thereof and hereof and providing with respect to such Upgrade
Contract the information set forth in the Contract Schedule and (ii) to the
Collateral Agent the original executed counterpart of the Upgrade Contract and
the rest of the contents of the related Collateral Agent 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 Vacation Credits at any time (i) after a payment by Trendwest of
the Purchase Price of the Receivable, (ii) after a Substitute Contract is
substituted for such Contract in accordance with the terms hereof, (iii) upon
the purchase of a Contract in accordance with Section 3.10(b) of the Servicing
Agreement, or (iv) if the related Receivable is a Releaseable Receivable, if the
Issuer delivers to the Trustee an Officer's Certificate (A) identifying the
Receivable and the related Contract and the related Vacation Credits to be
released, (B)
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requesting the release thereof, (C) setting forth the amount deposited in the
Collection Account with respect thereto, in the event such Contract, the related
Receivable and the related Vacation Credits are being released from the lien of
this Indenture pursuant to (i) or (iii) above, (D) certifying that the amount
deposited in the Collection Account equals (x) the Purchase Price of the
Receivable related to such Contract, in the event a Contract, the related
Receivable and the related Vacation 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 Vacation Credits in the event of a release from
the lien of this Indenture pursuant to (iii) above and (E) if Releaseable
Receivables are to be released, that the Notes of each Class are being paid down
to their respective Targeted Credit Enhancement Levels and the amount in the
Reserve Account is greater than or equal to the Reserve Account Required
Balance; provided, however, that upon the termination of a Contract, any
residual proceeds from the related Vacation Credits shall be placed in the
Collection Account prior to the Trustee or the Issuer releasing the related
Vacation Credits from the security interest granted to the Trustee by the Issuer
pursuant to this Indenture or to the Issuer by Trendwest pursuant to the
Receivables Purchase 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 Receivables Purchase Agreement
with respect to a Contract, the Trustee shall release from the lien of this
Indenture the Contract, the related Receivable and the related Vacation Credits
described in the Issuer's request for release and shall deliver, or instruct the
Collateral Agent to deliver, to or upon the order of the Issuer such Contract
and the related Collateral Agent File.
Section 4.05 Trust Estate. When required by the provisions of Articles
Four, Six and Twelve hereof, the Trustee shall execute instruments to release
property from the lien of this Indenture, or convey the Trustee's interest in
the same, in a manner and under circumstances which are not inconsistent with
the provisions of this Indenture. No party relying upon an instrument executed
by the Trustee as provided in this Article Four shall be bound to ascertain the
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any monies.
Section 4.06 Notice of Release. The Trustee shall be entitled to
receive at least 5 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 the 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 Trendwest,
TRI I, TRI II, TW Holdings and TW Holdings II to the
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Issuer, and (y) perfect and make effective the first priority lien and security
interest in the Trust Estate in favor of the Trustee, for the benefit of the
Noteholders, 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) On or before each anniversary of the Closing Date, the Issuer shall
furnish to the Trustee an Opinion of Counsel with respect to each jurisdiction
in which a UCC financing statement has been filed against each of Trendwest, TW
Holdings, TW Holdings II, TRI I TRI II, and the Issuer 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, 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 is necessary to maintain the first priority lien and security interest
created by this Indenture, and the security interest, if applicable, created by
the Receivables Purchase Agreement 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, any
indentures supplemental hereto 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 security interest, if applicable,
created by the Receivables Purchase Agreement until the next date a continuation
statement must be filed to maintain the Trustee's interest in the Collateral.
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ARTICLE FIVE
SATISFACTION AND DISCHARGE
Section 5.01 Satisfaction and Discharge of Indenture. (a) Following
payment in full of (i) the Notes, (ii) the fees and charges of the Trustee and
(iii) all other obligations of the Issuer under this Indenture, and the release
by the Trustee of the Trust Estate in accordance with Section 5.01(b) hereof,
this Indenture shall be discharged.
(b) In connection with the discharge of this Indenture and the release
of the Trust Estate, the Trustee shall release from the lien of this Indenture
and shall deliver, or instruct the Collateral Agent to deliver, to or upon the
order of the Issuer all property remaining in the Trust Estate and shall execute
and file, at the expense of the Issuer, UCC financing statements evidencing such
discharge and release.
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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) failure to make any payment of interest as required under
this Indenture which failure remains uncured for one Business Day; or
(2) failure to make any payment of principal as required
under this Indenture which failure remains uncured for 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, the Note Purchase
Agreement, the Receivables Purchase Agreement, the Collateral Agent
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, the Note Purchase
Agreement, the Receivables Purchase Agreement, the Collateral Agent
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
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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;
(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 Trendwest
of its repurchase obligations under Section 3.03 of the Receivables
Purchase Agreement.
Section 6.02 Acceleration of Maturity; Rescission and Annulment. If an
Event of Default with respect to the Note Outstanding occurs and is continuing,
then Holders of not less than 66-2/3 % in aggregate principal amount of the
Outstanding Notes of the Controlling Class 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 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 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 Agencies.
At any time after such a declaration of acceleration has been made, or
after such acceleration has automatically become effective, but before any Sale
of the Trust Estate has been made or a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of not less than 66-2/3% in aggregate principal amount of
the Outstanding Notes of the Controlling Class, by written notice to the Issuer
and the Trustee, may rescind and annul such declaration or automatic
acceleration and its consequences
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(except that in the case of a payment default on the Notes, the consent
of all the Noteholders 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,
(B) the principal of any Notes 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 Noteholder hereunder
and the reasonable compensation, expenses, disbursements and
advances of the Trustee and the 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 and the 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 the Notes, the whole amount then due and
payable on the Notes for principal and interest, with interest upon the overdue
principal and overdue interest at the applicable Note 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, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate
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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, the Trustee may do one or more of the following:
(a) institute Proceedings for the collection of all amounts
then due and payable on the 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 Trust Estate securing the
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 Trust Estate securing the 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 the
Notes hereunder;
provided, however, that without the consent of the Holders of not less than all
of the Outstanding Notes, the Trustee may not sell or otherwise liquidate any
portion of the Trust Estate unless the proceeds of such Sale or liquidation
distributable to the Noteholders are sufficient to discharge in full the amounts
then due and unpaid upon the 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 and (ii)
no Notes 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 Outstanding Notes, may elect, by giving written
notice of such election to the Issuer, to take possession of and retain the
Trust Estate securing the 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
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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 Trust Estate
securing the 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 Notes Outstanding of the Controlling Class.
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 Proceeding relating to the Issuer
or any other obligor upon any of the Notes or the property of the Issuer or of
such other obligor or their creditors, the Trustee (irrespective of whether the
principal of the 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 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 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 this Indenture to which the
Trustee shall be a party), the Trustee shall be held to
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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 this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any of
the Notes or the production thereof in any Proceeding relating thereto, and any
such Proceedings instituted by the Trustee shall be brought in its own name as
Trustee of an express trust, and any recovery 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 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 the Notes pursuant to this Article Six or otherwise and any other money that
may be held thereafter by the Trustee as security for the Notes, including
without limitation the amounts in the 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 Notes:
FIRST: To the payment to the Trustee of the Trustee Fee, its expenses
then due and any Unreimbursed Servicing Transfer Payments and to the Trustee its
costs incurred in connection with enforcing the remedies provided for in this
Article Six;
SECOND: To the payment of the Collateral Agent Fee, if not paid by the
Servicer;
THIRD: To the payment of all amounts due the Servicer pursuant to
Section 3.09 of the Servicing Agreement and, but for the acceleration of the
Notes, Section 12.02(d)(ii) hereof;
FOURTH: 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 the Class A Notes) on overdue interest to the Holders of
the Class A Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class A Notes for interest,
treating the three Classes of Class A Notes as one Class; provided, however, if
the amount available is insufficient to pay in full the interest owed on the
Class A Notes, the Holders of such Class of Class A Notes shall receive the
Interest Shortfall Payment for such Class, on a pro rata basis within such
Class;
FIFTH: 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
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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
the Class B Notes) on overdue interest to the Holders of the Class B Notes,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Class B Notes for interest;
SIXTH: To the payment of the amounts then due and unpaid upon the Class
C 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 the Class C Notes) on overdue interest to the Holders of
the Class C Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class C Notes for interest;
SEVENTH: To the payment of the amounts then due and unpaid upon the
Class D 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 the Class D Notes) on overdue interest to the Holders of
the Class D Notes, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Class D Notes for interest;
EIGHTH: To the payment of the remaining outstanding principal balance
of the Class A Notes ratably without preference or priority of any kind,
treating the three Classes of Class A Notes as one Class;
NINTH: To the payment of the remaining outstanding principal balance of
the Class B Notes ratably without preference or priority of any kind;
TENTH: To the payment of the remaining outstanding principal balance of
the Class C Notes ratably without preference or priority of any kind;
ELEVENTH: To the payment of the remaining outstanding principal balance
of the Class D Notes ratably without preference or priority of any kind;
TWELFTH: To the payment of any surplus to or at the written direction
of the Issuer or any other person legally entitled thereto.
Section 6.09 Limitation on Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
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(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 Controlling Class 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 Controlling Class; it being understood and intended that
no one or more Holders of Notes shall have any right in any manner
whatever by virtue of, or by availing of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes, or to obtain or to seek to obtain priority or
preference over any other Holders of Notes 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.
Section 6.10 Unconditional Right of Noteholders to Receive Principal
and Interest. Notwithstanding any other provision in this Indenture, the
Noteholders 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,
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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 Outstanding Notes of the Controlling Class,
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;
(2) any direction to the Trustee by the Noteholders to
undertake a private Sale of the Trust Estate shall be by the Holders of
not less than 66-2/3% in principal amount of Outstanding Notes of the
Controlling Class, 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 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.
Section 6.15 Waiver of Past Defaults. The Holders of not less than
66-2/3% in principal amount of the Outstanding Notes of the Controlling Class
may on behalf of the Holders of all the Notes waive any past Default hereunder
and its consequences, except a Default:
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(1) in the payment of the principal of, or premium, if any,
or interest on any Note, 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, holding in the
aggregate more than 50% in principal amount of the Outstanding Notes of the
Controlling Class, 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 this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 6.18 Sale of Trust Estate. (a) The power to effect any sale (a
"Sale") of any portion of the Trust Estate pursuant to Section 6.04 hereof shall
not be exhausted by any one or more Sales as to any portion of the Trust Estate
remaining unsold, but shall continue unimpaired until the entire Trust Estate
securing the Notes shall have been sold or all amounts payable on the Notes and
under this
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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 Trust Estate, or any portion
thereof unless:
(i) the Holders of not less than all of the Outstanding
Notes, 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 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 the 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, after deducting the
reasonable costs, charges and expenses incurred by the Trustee or the
Noteholders in connection with such Sale. The 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 the Notes. The Trustee or the 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 the Trust Estate in
connection with a Sale thereof. In addition, the Trustee is hereby irrevocably
appointed the agent and attorney-in-fact of the Issuer to transfer and convey
its interest in any portion of the Trust Estate in connection with a Sale
thereof, and to take all action necessary to effect such Sale. No purchaser or
transferee at such a sale shall be bound to ascertain the Trustee's authority,
inquire into the satisfaction of any conditions precedent or see to the
application of any monies.
(e) The method, manner, time, place and terms of any Sale of all or any
portion of the Trust Estate shall be commercially reasonable.
Section 6.19 Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer.
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ARTICLE SEVEN
THE TRUSTEE
Section 7.01 Certain Duties and Responsibilities. (a) Except during the
continuance of an Event of Default 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 known to the Trustee as provided in
subsection (e) below has occurred and is continuing, 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
Outstanding Notes in accordance with Section 6.14 hereof relating to
the time,
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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 Receivables Purchase 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, the Trust
Estate or this Indenture.
(f) The Trustee shall be under no obligation to institute any suit, or
to take any remedial action 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.
(g) Notwithstanding any extinguishment of all right, title and interest
of the Issuer in and to the Trust Estate following an Event of Default and a
consequent declaration of acceleration or automatic acceleration of the maturity
of the Notes, whether such extinguishment occurs through a Sale of the Trust
Estate to another person, the acquisition of the Trust Estate by the Trustee
with respect to the 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.
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(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 all Holders of Notes,
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;
(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,
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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 the 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
Vacation 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 the 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, TRI I, TRI II, TW Holdings, TW Holdings II or the Servicer with any
covenant or the breach by the Issuer, Trendwest, TRI I, TRI II, TW Holdings, TW
Holdings II or the Servicer of any warranty or representation made hereunder or
in any related document or the accuracy of any such warranty or representation,
any investment of monies in the Collection Account, the Prefunding Account, the
Upgrade Purchase Account or the Reserve Account or any loss resulting therefrom,
the acts or omissions of the Issuer, Trendwest, TRI I, TRI II, TW Holdings, TW
Holdings II, the Servicer or any Obligor, any action of the Servicer taken in
the name of the Trustee, or the validity of the Servicing 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
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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, in the amount of the Trustee Fee
and any investment income earned by the Trustee pursuant to Section
12.02 (net of losses for which the Trustee is liable pursuant to
Section 12.02)(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 Unreimbursed Servicing
Transfer Expenses, 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 the 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 the
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
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negligence or willful misconduct, willful misfeasance or bad faith in
the performance of duties. The indemnification of the Trustee provided
by this Section 7.07 shall be payable to the Trustee out of funds on
deposit in the Collection Account pursuant to subsection 12.02(d)(xx)
or 12.02(e)(xiv), as applicable; the Trustee shall have no ability to
sell or otherwise liquidate the Contracts in the Trust Estate solely in
order to obtain funds to finance this indemnification obligation. 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 resulting in an acceleration
of maturity of the Notes that has not been rescinded and annulled, the Trustee
shall have, as security for the performance of the Issuer under this Section
7.07, a lien ranking senior to the lien of the Notes 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 Trust Estate by the Trustee in its capacity as
such. The Trustee shall not institute any Proceeding seeking the enforcement of
such lien against any 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 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 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 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 and DCR (or, if not rated by Fitch and DCR, by S&P or Moody's) or
otherwise acceptable to the Holders of not less than 66-2/3% in principal amount
of the Outstanding Notes of the Controlling Class. If such Person 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 such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.08, it shall resign
immediately in the manner and with the effect hereinafter specified in this
Article Seven.
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Section 7.09 Resignation and Removal; Appointment of Successor. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article Seven shall become effective until the acceptance of
appointment by the successor Trustee 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 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 Outstanding Notes of
the Controlling Class by notice to the Trustee at any time.
(d) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause
with respect to the Notes, the Holders of not less than 66-2/3% in principal
amount of the Outstanding Notes of the Controlling Class or the Issuer, with the
written consent of Holders of not less than 66-2/3% in principal amount of
Outstanding Notes of the Controlling Class, may appoint a successor Trustee.
(e) The Issuer shall give notice to the Servicer, the Collateral Agent
and the Noteholders in the manner provided in Section 13.03 hereof of each
resignation and each removal of the Trustee and each appointment of a successor
Trustee with respect to the Notes. 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 and the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee but, on request of the 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, and shall duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.07 hereof. Upon
request of any such successor Trustee, the Issuer shall execute any and all
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instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be eligible under this Article
Seven.
Section 7.11 Merger, Conversion, Consolidation or Succession to
Business of Trustee. Any Person into which the Trustee may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such 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 Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Notes so authenticated with the same effect
as if such successor Trustee had itself authenticated such Notes.
Section 7.12 Co-Trustees and Separate Trustees. At any time or times,
for the purpose of meeting the legal requirements of any jurisdiction in which
any of the Trust Estate may at the time be located, the Issuer, and the Trustee
shall have power to appoint, and, upon the written request of the Trustee, or of
the Holders of Notes representing at least 25% of the aggregate principal amount
of the Outstanding Notes, 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 the
Trustee, either to act as co-Trustee, jointly with the Trustee of all or any
part of such Trust Estate, or to act as separate Trustee of any such property,
in either case with such powers as may be provided in the instrument of
appointment, and to vest in such Person or persons in the capacity aforesaid,
any property, title, right or power deemed necessary or desirable, subject to
the other provisions of this Section 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, the Trustee 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 shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms:
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(i) the Notes 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 hereunder, shall
be exercised solely by the Trustee;
(ii) the rights, powers, duties and obligations hereby
conferred or imposed upon the Trustee in respect of any property
covered by such appointment shall be conferred or imposed upon and
exercised or performed by the Trustee or by the Trustee and such
co-Trustee or separate Trustee jointly, as shall be provided in the
instrument appointing such co-Trustee or separate Trustee, except to
the extent that under any law of any jurisdiction in which any
particular act is to be performed, the Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such
co-Trustee or separate Trustee;
(iii) the Trustee 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, appointed under this Section 7.12, and, in case an
Event of Default has occurred and is continuing, the Trustee shall have
power to accept the resignation of, or remove, any such co-Trustee or
separate Trustee without the concurrence of the Issuer. Upon the
written request of the Trustee, the Issuer shall join with the Trustee
in the execution, delivery and performance of all instruments and
agreements necessary or proper to effectuate such resignation or
removal. A successor to any co-Trustee or separate Trustee that has so
resigned or been removed may be appointed in the manner provided in
this Section 7.12;
(iv) no co-Trustee or separate Trustee hereunder shall be
personally liable by reason of any act or omission of the Trustee or
any other such Trustee hereunder nor shall the Trustee be liable by
reason of any act or omission of any co-Trustee or separate Trustee
selected by the Trustee with due care or appointed in accordance with
directions to the Trustee pursuant to Section 6.14 hereof; and
(v) any Act of Noteholders delivered to the Trustee shall be
deemed to have been delivered to each such co-Trustee and separate
Trustee.
Section 7.13 Rights with Respect to the Servicer. The Trustee's rights
and obligations with respect to the Servicer shall be governed by the Servicing
Agreement.
Section 7.14 Appointment of Authenticating Agent. The Trustee may
appoint an Authenticating Agent or Agents with respect to the Notes which shall
be authorized to act on behalf of the Trustee to authenticate Notes issued upon
original issue or upon exchange, registration of transfer or pursuant to Section
3.06 hereof, and Notes so authenticated shall be entitled to the benefits of
this Indenture
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and shall be valid and obligatory for all purposes as if authenticated by the
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 a corporation 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 corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate 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
corporation 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 may at any time terminate
the agency of an Authenticating Agent 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, the 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, 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.
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The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 7.14, but the
Trustee shall not be entitled to be reimbursed for such payments.
If an appointment is made pursuant to this Section 7.14, the Notes 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 Indenture.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By
As Authenticating Agent
By
Authorized Signatory
Section 7.15 Collateral Agent to Hold Contracts. The Collateral Agent,
as agent (solely for the purpose of perfecting the security interest of the
Trustee in the Contracts and the related Collateral Agent Files) and bailee of
the Trustee, shall hold each Contract, together with any documents relating
thereto that may from time to time be delivered to the Collateral Agent, until
such time as such Contract is released from the lien of this Indenture pursuant
to the terms hereof. Within 10 days of the Closing Date, the Collateral Agent
will review each Collateral Agent File to determine whether or not such file is
complete, and it shall file an exception report with the Issuer, the Trustee and
the Servicer within such time period. If an exception is not cured within 40
days of the Closing Date, the related Contract must be repurchased by Trendwest
within 30 days of the end of such 40-day period. The Trustee shall have no
responsibility or liability for the actions or inactions of the Collateral Agent
with respect to such review.
The Trustee shall be under no duty or obligation to inspect, review or
examine the Contracts or the related Collateral Agent 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.
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ARTICLE EIGHT
RESERVED
ARTICLE NINE
SUPPLEMENTAL INDENTURES
Section 9.01 Supplemental Indentures Without Consent of Noteholders.
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, 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.
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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 Agencies a copy of such
supplemental indenture.
Section 9.02 Supplemental Indentures with Consent of Noteholders. With
the consent of the Holders of not less than 66-2/3% in aggregate principal
amount of the Outstanding Notes of the Controlling Class, 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 or of modifying in any manner the rights of
the Holders of the Notes under this Indenture; provided, however, that no such
supplemental indenture shall, without the consent of the Holders of each
Outstanding Note 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 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 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 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
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
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(7) modify any of Sections 6.01(l) or (2), 6.02, 6.03,
6.08, 6.18, 12.02(d), 12.02(e) or 12.02(f) 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 Agents a copy of such
supplemental indenture.
Notwithstanding anything to the contrary herein, no supplemental
Indenture relating to changing the Notes into notes in bearer form shall be
effective until an Opinion of Counsel from a nationally recognized law firm has
been delivered to the Trustee to the effect that such supplemental Indenture
will not subject the Issuer or the Holders of the Notes to any additional taxes
under U.S. federal law.
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.
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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, in whole but not
in part, as to the then Outstanding Notes, on any Payment Date (the "Redemption
Date") after the aggregate principal amount of the then Outstanding Notes is
less than 10% of the original aggregate principal amount of the Notes, at the
applicable Redemption Price plus any fees due hereunder.
The Issuer shall set the Redemption Date and the Redemption Record Date
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 shall continue to be payable to the Holders of Notes called for redemption
as of the relevant Record Dates according to their terms and the provisions of
Section 3.07 hereof. The election of the Issuer to redeem any Notes 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 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 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 five Business Days following the date on which
such notice was received, 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.
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Notice of redemption of Notes 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 shall, on the
Redemption Date, become due and payable at the Redemption Price and on such
Redemption Date (unless the Issuer shall default in the payment of the
Redemption Price) such Notes shall cease to bear interest. The Holders of such
Notes shall be paid the 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 the Redemption Date shall be payable to the Holders of such
Notes registered as such on the relevant Record Dates according to their terms
and the provisions of Section 3.07 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
Redemption Date at the Note 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 on which the Trustee relies in accepting the Trust Estate in
trust and in authenticating the Notes. Such representations and warranties are
made as of the Closing Date, but shall survive the transfer, grant and
assignment of the 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
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its obligations under this Indenture, the Notes, the Servicing Agreement, the
Note Purchase Agreement, the Collateral Agent Agreement or the Receivables
Purchase Agreement.
(b) Authorization. The Issuer has the power, authority and legal right
to execute, deliver and perform this Indenture, the Notes, the Receivables
Purchase Agreement, the Servicing Agreement, the Note Purchase Agreement and the
Collateral Agent Agreement and the execution, delivery and performance of this
Indenture, the Notes, the Servicing Agreement, the Note Purchase Agreement, the
Collateral Agent Agreement and the Receivables Purchase Agreement have been duly
authorized by the Issuer by all necessary action.
(c) Binding Obligation. This Indenture, the Notes, the Servicing
Agreement, the Note Purchase Agreement, the Collateral Agent Agreement and the
Receivables Purchase Agreement have been duly executed and delivered by the
Issuer, and this Indenture, assuming due authorization, execution and delivery
by the Trustee and the Servicer, the Receivables Purchase Agreement, assuming
due authorization, execution and delivery by TRI I, TRI II, TW Holdings, TW
Holdings II and Trendwest, the Servicing Agreement, assuming due authorization,
execution and delivery by the Servicer and the Trustee, the Note Purchase
Agreement, assuming due authorization, execution and delivery by the Initial
Purchaser, and the Collateral Agent Agreement, assuming due authorization,
execution and delivery by the Trustee, the Collateral Agent 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, the Notes, the Servicing
Agreement, the Note Purchase Agreement, the Collateral Agent Agreement and the
Receivables Purchase 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 or the Receivables Purchase 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
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instrumentality (A) asserting the invalidity of this Indenture, the Servicing
Agreement, the Receivables Purchase Agreement, the Note Purchase Agreement, the
Collateral Agent Agreement or the Notes, (B) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated by the
Receivables Purchase Agreement, this Indenture, the Servicing Agreement, the
Note Purchase Agreement, the Collateral Agent Agreement or the Notes 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, the Servicing Agreement, the Receivables
Purchase Agreement, the Note Purchase Agreement, the Collateral Agent 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, the
Servicing Agreement, the Note Purchase Agreement, the Collateral Agent Agreement
or the Receivables Purchase Agreement and with the valid and proper
authorization, issuance and sale of the Notes pursuant to this Indenture and the
Note Purchase Agreement (except approvals of State securities officials under
the Blue Sky laws), have been or will be taken or obtained on or prior to the
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 9805 Willows Road, Redmond, Washington
98052 or at such other location where all action required by Section 11.02(f)
hereof shall have been taken place with respect to the Trust Estate. The Issuer
has not used any other address in the previous five-year period.
(h) Transfer and Asset Assignment. Upon the delivery to the Collateral
Agent of the Contracts and the filing of the UCC financing statements described
in Sections (vii) and 4.02(a) hereof, the Trustee for the benefit of the
Noteholders shall have a first priority perfected security interest in the
Receivables, the Contracts and in the proceeds thereof, 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 Trust Estate (other
than the Vacation Credits), including the transfer of the Contracts and the
payments to become due thereunder, have been made.
(i) Stockholders of the Issuer. Trendwest is the sole stockholder of
the Issuer; all of the stock of the Issuer has been fully paid and is owned of
record, free and clear of all mortgages, assignments, pledges, security
interests, warrants, options and rights to purchase. The Issuer will not permit
any stockholder to transfer its stock, other than for estate planning purposes,
without the consent of the Holders of a majority in principal amount of
Outstanding Notes of the Controlling Class. The Issuer shall ensure that at all
times at least one of its directors is an independent director.
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(j) Receivables Purchase Agreement. As of the Closing Date, the Issuer
has entered into the Receivables Purchase Agreement and the Asset Assignment
with TRI I, TRI II, TW Holdings, TW Holdings II and Trendwest relating to its
acquisition of the Receivables related to the Contracts identified therein and a
security interest in related Vacation Credits, and the representations and
warranties made by TRI I, TRI II, TW Holdings, TW Holdings II and Trendwest
relating to such Contracts, such Receivables and such interests in the related
Vacation 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
Contracts and the related Receivables and the grant of a security interest in
the related Vacation Credits by TRI I, TRI II, TW Holdings, TW Holdings II and
Trendwest to the Issuer to the Trustee pursuant to the Receivables Purchase
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
Contracts and the related Receivables and the security interest in the related
Vacation Credits as a sale to the Issuer for federal, State and local income tax
reporting and accounting purposes.
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(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 Outstanding Notes of the Controlling
Class.
(r) Private Offering by Issuer. Assuming that the Notes are offered and
sold in the manner contemplated in the Note Purchase Agreement and in the
Offering Memorandum and assuming that the representations made in the
representation letters of the purchasers of the Notes are true and correct, the
Notes are not required to be registered under Section 5 of the Securities Act in
connection with the offer, issuance, sale and delivery thereof as contemplated
by the Offering Memorandum and the Note Purchase Agreement and neither the
Issuer nor any agent acting on its behalf, has taken or will take any action
which would subject the offer, issuance, sale or delivery of the Notes to the
provisions of Section 5 of the Securities Act or to the registration provisions
of any state securities laws of any applicable jurisdiction.
(s) No Untrue Statements of Material Fact. The information furnished or
caused to be furnished by the Issuer contained in the Offering Memorandum will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
Any materials concerning the Issuer provided by or on behalf of the Issuer from
time to time to holders of the Notes or to prospective purchasers with respect
to resales of the Notes pursuant to Rule 144A(d)(4) of the rules and regulations
promulgated under the Securities Act, when so provided, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(t) Number of Vacation Credits. As of June 30, 1999, there were
611,696,000 existing Vacation Credits.
(u) Information Regarding Receivables. As of the Initial Cut-Off Date,
the information relating to the Receivables provided to the Initial Purchaser by
or on behalf of the Issuer was true and correct in all material respects.
Section 11.02 Covenants. The Issuer hereby makes the following covenants
on which the Trustee relies in accepting the Trust Estate in trust and in
authenticating the Notes. Such covenants are made as of the Closing Date, but
shall survive the transfer, grant and assignment of the Trust Estate to the
Trustee.
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(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 Trust Estate 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 Lien on any
portion of the Trust Estate immediately upon discovery thereof; and the Issuer
shall defend the right, title and interest of the Trustee in, to and under the
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 of the 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
the 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
Contract 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 the 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 Vacation 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 Trust
Estate.
(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 Trust Estate (other than the Vacation
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Credits), (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 the 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 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 Receivables Purchase Agreement, 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 TRI I, TRI
II, TW Holdings, TW Holdings II and Trendwest and will maintain a telephone
number separate from that of TRI I, TRI II, TW Holdings, TW Holdings II 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)
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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
of the Controlling Class.
(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 entities"
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 a member of an affiliated group
with Trendwest within the meaning of Section 1504 of the Code and will file a
consolidated return with Trendwest for federal income tax purposes at all times
until after the termination of this Indenture.
(1) Security Interest in the Vacation Credits. The Issuer warrants that
it has a valid security interest in the Vacation Credits and that it will defend
its security interest in such Vacation 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 Vacation
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
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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 and the 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, and Trendwest, TRI I,
TRI II, TW Holdings and TW Holdings II 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
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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 will be
used by the Issuer (i) to pay the Acquisition Consideration, (ii) to pay the
expenses associated with the issuance of Notes pursuant to this Indenture and
the transactions contemplated hereby and by the Receivables Purchase Agreement
and the Servicing Agreement and (iii) for the Issuer's general
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business purposes. None of the transactions contemplated in this Indenture, 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 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 U, 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 Collateral Agent Files. The Issuer shall deliver, or
cause to be delivered, to the Collateral Agent the Collateral Agent Files
related to the Contracts identified on the Contract Schedule within 10 days of
the Closing Date in accordance with Section 4.01(b)(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) Redemption. 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) Information Regarding the Trust Estate. The Issuer shall provide to
the Trustee or any Noteholder or Note Owner 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 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.
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(z) Closing Date Deposit of Collections. The Issuer shall deposit or
cause to be deposited into the Collection Account from the proceeds of the Notes
an amount at least equal to the collections on the Trust Estate from the Initial
Cut-Off Date to the Closing Date.
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 the
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 file any involuntary
petition or 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; 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 Outstanding Notes of the Controlling Class.
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 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 of the Controlling Class 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. (a) On the Closing Date, the Issuer
shall cause the Trustee to open and maintain an account (the "Collection
Account"), which at all times shall be an Eligible Account and which shall be
established at the Trustee, for the benefit of the Noteholders, for the receipt
of (i) amounts deposited into the Local Bank Account, (ii) any Reinvestment
Income, (iii) amounts transferred
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from the Reserve Account in accordance with Sections 12.03(d)(i), and
(iii) hereof and (iv) amounts transferred from the Capitalized Interest Account
in accordance with Section 12.05(d) hereof. All payments to be made from time to
time by the Issuer to the Noteholders out of funds in the Collection Account
pursuant to this Indenture shall be made by the Trustee or the Paying Agent of
the Issuer. Funds in the Collection Account shall not be commingled with any
other monies. All monies deposited from time to time in the Collection Account
pursuant to this Indenture shall be held in the name of the Trustee as part of
the Trust Estate as herein provided.
(b) Upon Issuer Order, the Trustee shall invest the funds in the
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 second Business Day preceding the next following
Payment 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 the 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. The Trustee shall have no responsibility for
verifying that any investments directed by the Issuer are Eligible Investments.
Anything to the contrary notwithstanding, the Trustee shall be entitled to
invest funds in the Collection Account in Eligible Investments on the second
Business Day preceding each Payment Date and shall be entitled to the income and
gain from such Eligible Investments for its one-day investment; such Eligible
Investments shall mature not later than the Business Day preceding the related
Payment Date; the Trustee shall be liable for any loss incurred on account of
such investment.
(c) Any income or other gain from investments in Eligible Investments
as outlined in (b) above shall be credited to the 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 Collection Account to the extent of any
losses therein caused as a result of the Issuer's investment instructions
provided for herein. Except as set forth in Section 12.02(b), 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 not occurring during a Trigger Event Period,
then on such Payment Date, after making all transfers and deposits into the
Collection Account from the Reserve Account pursuant to clauses (i) and (iii) of
Section 12.03(d) hereof and from the Capitalized Interest Account pursuant to
Section 12.05 hereof and from the Prefunding Account pursuant to Section 12.04
hereof, the Trustee shall withdraw from the Collection 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 Monthly Servicer's Report (the determination by the Servicer
of such amounts shall, in the absence of manifest error, be deemed to be
presumptively correct and the Trustee shall be protected in relying upon the
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same with out any independent check or investigation); provided that the Trustee
shall, to the extent funds are available in the Collection Account, make
interest payments based on the outstanding principal balance of the Notes even
if it shall not have received the Monthly Servicer's Report:
(i) to the Trustee, the Trustee Fee and any Unreimbursed
Servicing Transfer Payments (up to a cumulative limit of $50,000);
(ii) to the Collateral Agent, the Collateral Agent Fee if
not paid by the Servicer;
(iii) to the Servicer (if Trendwest or an Affiliate is not the
Servicer): (A) the Servicer Fee; 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 (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, from amounts received as Recoveries from any
Defaulted Contracts;
(iv) to the Class A-1 Noteholders, the Class A-2 Noteholders
and the Class A-3 Noteholders, the aggregate interest due on the
Outstanding Class A-1 Notes, Class A-2 Notes and Class A-3 Notes on
that Payment Date and any Overdue Interest; provided, however, if the
amount available is insufficient to pay in full the interest owed on
the Class A Notes, the Holders of each Class of Class A Notes shall
receive the Interest Shortfall Payment for such Class;
(v) to the Class B Noteholders, the aggregate interest due on
the Outstanding Class B Notes on that Payment Date and any Overdue
Interest;
(vi) to the Class C Noteholders, the aggregate interest due on
the Outstanding Class C Notes on that Payment Date and any Overdue
Interest;
(vii) to the Class D Noteholders, the aggregate interest due on
the Outstanding Class D Notes on that Payment Date and any Overdue
Interest;
(viii) to the Class A Noteholders, the Class A Principal
Distribution Amount, (a) to Class A-1 Noteholders until the principal
balance of the Class A-1 Notes has been reduced to zero; then (b) to
the Class A-2 Noteholders, the Class A Principal Distribution Amount
over any such amounts distributed to the Class A-1 Noteholders on such
Payment Date, until the principal balance of the Class A-2 Notes has
been reduced to zero; and then (c) to the Class A-3 Notes, the Class A
Principal Distribution Amount over any such amounts distributed to the
Class A-1 and Class A-2 Noteholders on such Payment Date, until the
principal balance of the Class A-3 Notes has been reduced to zero;
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(ix) to the Class B Noteholders, the Class B Principal
Distribution Amount;
(x) to the Class C Noteholders, the Class C Principal
Distribution Amount;
(xi) to the Class D Noteholders, the Class D Principal
Distribution Amount;
(xii) to deposit to the Reserve Account an amount necessary, if
any, to bring the amount on deposit in the Reserve Account to the
Reserve Account Required Balance;
(xiii) (a) to the Class A-1 Noteholders, the Class A
Supplemental Principal Distribution Amount until the principal balance
of the Class A-1 Notes has been reduced to zero, then (b) to the Class
A-2 Noteholders, the Class A Supplemental Principal Distribution Amount
over any such amounts distributed to the Class A-1 Noteholders on such
Payment Date, until the principal balance of the Class A-2 Notes has
been reduced to zero, and then (c) to the Class A-3 Notes, the Class A
Supplemental Principal Distribution Amount over any such amounts
distributed to the Class A-1 and Class A-2 Noteholders on such Payment
Date, until the principal balance of the Class A-3 Notes has been
reduced to zero;
(xiv) to the Class B Noteholders, the Class B Supplemental
Principal Distribution Amount;
(xv) to the Class C Noteholders, the Class C Supplemental
Principal Distribution Amount;
(xvi) to the Class D Noteholders, the Class D Supplemental
Principal Distribution Amount;
(xvii) if Trendwest is the Servicer, to Trendwest: (A) the
Servicer Fee; and (B) the amounts necessary to reimburse the Servicer
as provided in Section 3.09 of the Servicing Agreement 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, from amounts received as Recoveries
from any Defaulted Contracts;
(xviii) to pay Trendwest interest due on the Subordinated Note;
(xix) to pay Trendwest, principal due on the Subordinated Note;
(xx) to pay to the Trustee any other amounts due to the
Trustee as expressly provided herein and in the Servicing Agreement,
including Unreimbursed Servicing Transfer Payments not paid pursuant to
clause (i) above;
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(xxi) to remit any excess funds to or at the direction of the
Issuer.
The foregoing provisions of paragraph 12.02(d) notwithstanding, any
monies deposited in the Collection Account for purposes of redeeming Notes
pursuant to Article Ten hereof shall, subject to Section 11.02(o) hereof, remain
in the Collection Account until used to redeem such Notes.
(e) On each Payment Date during a Trigger Event Period if either no
Default or Event of Default shall have occurred and be continuing or the entire
unpaid principal amount of the Notes shall not have been declared, have
automatically become or otherwise have become due and payable pursuant to
Section 6.02 hereof, then on such Payment Date, after making all transfers and
deposits into the Collection Account from the Reserve Account pursuant to
clauses (i) and (iii) of Section 12.03(d) hereof and from the Capitalized
Interest Account pursuant to Section 12.05 hereof and the Prefunding Account
pursuant to Section 12.04 hereof, the Trustee shall withdraw from the Collection
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 Monthly Servicer's Report; provided that
the Trustee shall, to the extent funds are available in the Collection Account,
make interest payments based on the outstanding principal balance of the Notes
even if it shall not have received the Monthly Servicer's Report:
(i) to the Trustee, the Trustee Fee and any Unreimbursed
Servicing Transfer Payments (up to a cumulative limit of $50,000);
(ii) to the Collateral Agent, the Collateral Agent Fee if
not paid by the Servicer;
(iii) to the Servicer: (A) the Servicer Fee; 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 (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; from amounts received as Recoveries
from any Defaulted Contracts;
(iv) to the Class A-1 Noteholders, the Class A-2 Noteholders
and the Class A-3 Noteholders, pro rata, the aggregate interest due on
the Outstanding Class A-1 Notes, Class A-2 Notes and Class A-3 Notes on
that Payment Date and any Overdue Interest; provided, however; if the
amount available is insufficient to pay in full the interest owed on
the Class A Notes, the Holders of each Class of Class A Notes shall
receive the Interest Shortfall Payment for such Class;
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(v) to the Class B Noteholders, the aggregate interest due on
the Outstanding Class B Notes on that Payment Date and any Overdue
Interest;
(vi) to the Class C Noteholders, the aggregate interest due on
the Outstanding Class C Notes on that Payment Date and any Overdue
Interest;
(vii) to the Class D Noteholders, the aggregate interest due on
the Outstanding Class D Notes on that Payment Date and any Overdue
Interest;
(viii) to the Class A Noteholders, the Class A Principal
Distribution Amount, pro rata, until the principal balance of the Class
A Notes is reduced to zero;
(ix) to the Class B Noteholders, the Class B Principal
Distribution Amount, pro rata, until the principal balance of the Class
B Notes is reduced to zero
(x) to the Class C Noteholders, the Class C Principal
Distribution Amount, pro rata, until the principal balance of the Class
C Notes is reduced to zero
(xi) to the Class D Noteholders, the Class D Principal
Distribution Amount, pro rata, until the principal balance of the Class
D Notes is reduced to zero
(xii) to Trendwest, the interest due Trendwest under the
Subordinated Note;
(xiii) to Trendwest, the principal due to Trendwest under the
Subordinated Note until the principal balance of the Subordinated Note
is reduced to zero;
(xiv) to the Trustee, any other amounts due to the Trustee as
expressly provided herein and in the Servicing Agreement, including
Unreimbursed Servicing Transfer Payments not paid pursuant to clause
(i) above;
(xv) to the Servicer, any other amounts due the Servicer as
expressly provided herein and in the Servicing Agreement; and
(xvi) to remit any excess funds to or at the direction of the
Issuer.
The foregoing provisions of paragraph 12.02(e) notwithstanding, any
monies deposited in the Collection Account for purposes of redeeming Notes
pursuant to Article Ten hereof shall, subject to Section 11.02(o) hereof, remain
in the Collection Account until used to redeem such Notes.
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(f) Upon the Issuer's or the Trustee's obtaining actual knowledge of
the occurrence of any Trigger Event, the Issuer or the Trustee, as the case may
be, shall within two Business Days of obtaining such actual knowledge notify the
other and Noteholders of such occurrence.
Section 12.03 Reserve Account. (a) Prior to the Closing Date, the
Trustee shall open and maintain a trust account (the "Reserve Account"), which
at all times will be an Eligible Account, for the benefit of the Noteholders,
for the receipt of the initial deposit of $2,546,000 and of deposits pursuant to
Section 12.02(d)(xii) hereof. The Issuer agrees to deposit $2,546,000 in the
Reserve Account on or prior to the Closing Date. Monies received in the Reserve
Account 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 the Reserve
Account as part of the Trust Estate as security for the Notes subject to
disbursement and withdrawal as herein provided. Monies shall be subject to
withdrawal in accordance with Section 12.03(d) hereof.
(b) Upon Issuer Order all or a portion of the Reserve Account shall be
invested and reinvested at the Issuer's written direction in one or more
Eligible Investments. In the absence of an Issuer Order, the Trustee shall
invest funds in the 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 such Reserve Account, and any loss resulting from such
investments shall be charged to such Reserve Account; provided, however, that
the Issuer shall make or cause to be made on any Remittance Date a deposit to
the 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. 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 the 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 the 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 shall be made as detailed in
the Monthly Servicer Report, to the extent funds therefor are available, only as
follows:
(i) in the event that the amount in the Collection Account at
2:00 p.m., New York 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 distributed on the related Payment Date pursuant to
clauses (i)-(xi) of
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Section 12.02(d) hereof, the Trustee shall, in accordance with the
related Monthly Servicer's Report, withdraw funds from the Reserve
Account on or prior to 5:00 p.m., New York time, on the Remittance Date
to the extent necessary to make such payments on such Payment Date and
deposit such funds into the Collection Account;
(ii) subject to subparagraphs (iii) and (iv) of this Section
12.03(d), in the event that on any Payment Date the balance in the
Reserve Account equals an amount greater than the Reserve Account
Required Balance (after giving effect to the distributions listed in
Section 12.02(d)(i)-(xi) hereof on such Payment Date in accordance with
the Monthly Servicer's Report), the Trustee shall withdraw funds in the
Reserve Account in such amount so that the remaining amount in the
Reserve Account after such withdrawal will equal the Reserve Account
Required Balance, and disburse such amounts to or at the direction of
the Issuer; no funds shall be released to the Issuer pursuant to this
subparagraph (ii) if any of a Trigger Event Period or an Event of
Default has occurred and is continuing;
(iii) if a Trigger Event has occurred and is continuing, the
Trustee shall on the next Determination Date, withdraw all funds from
the Reserve Account (or any such lesser amount of such funds as such
Holders may direct) and deposit such funds into the Collection Account
for disbursement in accordance with the provisions of Section 12.02(d)
hereof;
(iv) on the Final Payment Date with respect to the Class D
Notes, to the extent any funds remain in the Reserve Account after
distributions pursuant to clauses (i) through (xi) of Section 12.02(d),
such remaining amounts shall be used to pay the amounts set forth in
clauses (xiii) through (xxi) of Section 12.02(d).
Section 12.04 Prefunding Account. (a) Prior to the Closing Date, the
Trustee shall open and maintain a trust account (the "Prefunding Account"),
which at all times will be an Eligible Account, for the benefit of the
Noteholders, for the receipt of the initial deposit of $6,221,827 from the
proceeds of the Notes. The Issuer agrees to deposit $6,221,827 in the Prefunding
Account on or prior to the Closing Date. Monies received in the Prefunding
Account 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 the Prefunding
Account as part of the Trust Estate as security for the Notes subject to
disbursement and withdrawal as herein provided. Monies shall be subject to
withdrawal in accordance with Section 12.04(d) hereof.
(b) Upon Issuer Order, all or a portion of the Prefunding Account shall
be invested and reinvested at the Issuer's written direction in one or more
Eligible Investments. In the absence of an Issuer Order, the Trustee shall
invest funds in the Prefunding 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 Prefunding Account, and any loss resulting
from such investments shall be charged to the Prefunding Account; provided,
however, that the Issuer shall make or cause to
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be made on any Remittance Date a deposit to the Prefunding 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. 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 12.04(b) hereof
shall be needed for disbursement from the Prefunding Account as set forth in
Section 12.04(d) hereof, the Trustee shall cause such investments of such
Prefunding Account to be sold or otherwise converted to cash to the credit of
such Prefunding Account. The Trustee shall not be liable for any investment loss
resulting from investment of money in the Prefunding 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 Prefunding Account shall be made as detailed
in writing by the Issuer or the Servicer on behalf of the Issuer, to the extent
funds therefor are available, only as follows:
(i) on each Subsequent Transfer Date, the Servicer shall
instruct the Trustee in writing (x) to withdraw from the Prefunding
Account an amount equal to the sum of (A) the Collateral Value as of
the related Subsequent Cut-Off Date of the Subsequent Contracts
transferred to the Issuer and pledged to the Trustee on such Subsequent
Transfer Date as of the related Subsequent Cut-Off Date and (B) any
Scheduled Payments with respect to the related Subsequent Contracts due
on or prior to such Subsequent Cut-Off Date but not received through
such Subsequent Cut-Off Date and (y) subject to the receipt of the
items described in Section 4.01(c), to distribute such amount to or at
the direction of the Issuer in accordance with the instructions
provided to the Trustee; and
(ii) if the amount in the Prefunding Account has not been
reduced to zero on the Prefunding Period Termination Date after giving
effect to any reductions in the amount in the Prefunding Account on
such Payment Date pursuant to clause (i) above, the Servicer shall
instruct the Trustee in writing to withdraw from the Prefunding Account
on such Payment Date all amounts remaining on deposit in the Prefunding
Account (excluding any Reinvestment Income in such account) and
distribute such amount to the Class A-1 Noteholders as a prepayment of
principal; provided, however, that if such amount is greater than
$100,000, such amount will be paid pro rata to all of the Class A
Noteholders.
Section 12.05 Capitalized Interest Account. (a) On or prior to the
Closing Date, the Trustee shall open and maintain a trust account (the
"Capitalized Interest Account"), which at all times will be an Eligible Account,
for the benefit of the Noteholders, for the receipt of an initial deposit of
$32,112.18
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from the proceeds of the Notes. The Issuer agrees to deposit $32,112.18 in the
Capitalized Interest Account on or prior to the Closing Date. Monies received in
the Capitalized Interest Account 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 the Capitalized Interest Account as part of the Trust Estate as security for
the Notes subject to disbursement and withdrawal as herein provided. Monies
shall be subject to withdrawal in accordance with Section 12.05(d) hereof.
(b) Upon Issuer Order all or a portion of the Capitalized Interest
Account shall be invested and reinvested at the Issuer's written direction in
one or more Eligible Investments. In the absence of an Issuer Order, the Trustee
shall invest funds in the Capitalized Interest 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 Capitalized Interest Account, and
any loss resulting from such investments shall be charged to the Capitalized
Interest Account; provided, however, that the Issuer shall make or cause to be
made on any Remittance Date a deposit to the Capitalized Interest 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. 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 12.05(b) hereof
shall be needed for disbursement from the Capitalized Interest Account as set
forth in Section 12.05(d) hereof, the Trustee shall cause such investments of
such Capitalized Interest Account to be sold or otherwise converted to cash to
the credit of the Capitalized Interest Account. The Trustee shall not be liable
for any investment loss resulting from investment of money in the Capitalized
Interest 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 Capitalized Interest Account shall be made
as detailed in the Monthly Servicer Report, to the extent funds therefor are
available, only as follows:
(i) On or before each Payment Date occurring during the
Prefunding Period and on or before the Payment Date on or immediately
succeeding the Prefunding Period Termination Date, the Trustee shall
withdraw from the Capitalized Interest Account for deposit into the
Collection Account the amount equal to the aggregate amount of interest
accruing at the weighted average of one-twelfth of the Class A-1 Note
Rate, the Class A-2 Note Rate, the Class A-3 Note Rate, and the Class B
Note Rate, the Class C Note Rate and the Class D Note Rate on the
amount on deposit in the Prefunding Account, less projected investment
earnings on the Prefunding Account, as of the related Payment Date.
Amounts in the Capitalized Interest Account shall be withdrawn solely
to pay such
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amounts and shall not be available to the Noteholders or the Trustee
for any other purpose.
(ii) Any amounts remaining on deposit in the Capitalized
Interest Account on the Payment Date on or immediately succeeding the
Prefunding Period Termination Date (after taking account any transfer
from the Capitalized Interest Account to the Collection Account on such
Payment Date) shall be withdrawn from the Capitalized Interest Account,
paid to the Issuer and released from the Lien of this Indenture; after
such payment, the Trustee shall close the Capitalized Interest Account.
Section 12.06 Reports by Trustee to Noteholders. (a) On each Payment
Date the Trustee shall account to the Initial Purchaser, each Holder of Notes
and to the Rating Agencies 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 Trustee may satisfy its obligations under this Section 12.06 by delivering
the Monthly Servicer's Report to each such Holder of the Notes, the Rating
Agencies and the Issuer. On or before the 5th day prior to the Final Payment
Date with respect to any Class, the Trustee shall send notice to the Rating
Agencies and to the Initial Purchaser the Holders of the Notes of such Class of
such Final Payment Date. Such notice shall include a statement that if such
Notes are paid in full on the Final Payment Date, interest shall cease to accrue
as of the day immediately preceding such Final Payment Date.
The Trustee will make the Monthly Servicer's Report (and, at its
option, any additional files containing the same information in an alternative
format) available each month to Holders of Notes or potential transferees
thereof that provide to Norwest an executed Note Owner Certificate, via the
Trustee's internet website and its fax-on-demand service. The Trustee's
fax-on-demand service may be accessed by calling (301) 815-6610. The Trustee's
internet website shall initially be located at "www.ctslink.com". Assistance in
using the website or the fax-on-demand service can be obtained by calling the
Trustee's customer service desk at (301) 815-6600. Parties that are unable to
use the above distribution options are entitled to have a paper copy mailed to
them via first class mail by calling the customer service desk and indicating
such. The Trustee shall have the right to change the way Monthly Servicer's
Report are distributed in order to make such distribution more convenient and/or
more accessible to the above parties and the Trustee shall provide timely and
adequate notification to all above parties regarding any such changes.
(b) The Servicer shall provide to each owner of an interest any Note
who executes and delivers an executed Note Owner Certificate to the Servicer any
information required to be delivered to the Noteholders pursuant to Article IV
of the Servicing Agreement to the extent such information is not provided on the
website of the Trustee described in Section 12.06(a). The Servicer may provide
such information via mail, facsimile, overnight courier, hand delivery,
electronic transmission in a format reasonably acceptable to the Servicer and
such Note Owner, or by posting the information to a website to which such Note
Owner is given access.
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(c) Annually (and more often if required by applicable law), 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.
Section 13.02 Notices, etc., to Trustee, Issuer, Servicer and the Rating
Agencies. 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:
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(a) to the Trustee at 11000 Broken Land Parkway, Columbia,
Maryland 21044 (facsimile number (410) 884-2363), Attention: Corporate
Trust Services, Asset-Backed Administration, TRI Funding III, Inc.
1999-1, with a copy to the Trustee at Sixth Street and Marquette
Avenue, MAC N9311-161, Minneapolis, MN 55479 (facsimile number (612)
667-3539), Attention: Corporate Trust Services, Asset-Backed
Administration or at any other address previously furnished in writing
to the Issuer and the Servicer; or
(b) to the Issuer at TRI Funding III, Inc., 9805 Willows
Road, Redmond, Washington 98052 (facsimile number (425) 498-3050),
Attention: Chief Financial Officer, or at any other address previously
furnished in writing to the Trustee and the Servicer by the Issuer; or
(c) to the Servicer at Trendwest Resorts, Inc., 9805 Willows
Road, Redmond, Washington 98052 (facsimile number (425) 498-3050),
Attention: Chief Financial Officer, or at any other address previously
furnished in writing to the Trustee and the Issuer; or
(d) to the Initial Purchaser at One New York Plaza,
14th Floor, New York, New York 10292, Attention: Asset-Backed
Securities Group; or
(e) to DCR at 17 State Street, 12th Floor, New York, New York
10004, (facsimile number (212) 908-0355) Attention:
Securities/Timeshare Group, or at any other address previously
furnished in writing to the Trustee and the Issuer; or
(f) to Fitch at One State Street Plaza, New York, New York
10004 (facsimile number (212) 514-9879), or at any other address
previously furnished in writing to the Trustee and 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.
86
<PAGE>
(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
87
<PAGE>
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, member, 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.
88
<PAGE>
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.
Section 13.14 Parties will Not Institute Insolvency Proceedings. During
the term of this Agreement and for one year and one day after the termination
hereof, none of the parties hereto or any Affiliate thereof or any Holder of
Outstanding Notes (and each Holder of Outstanding Notes so agrees by acceptance
of a Note) will file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other proceeding under any federal or state bankruptcy or similar law against
the Issuer.
89
<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 III, INC., Issuer
By:
Name:
Title:
TRENDWEST RESORTS, INC.,
Servicer
By:
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee
By:
Name:
Title:
90
<PAGE>
EXHIBIT A
INVESTMENT LETTER
TRI FUNDING III, INC.
______% RECEIVABLES-BACKED NOTES CLASS _____, SERIES 1999-1
TRI Funding III, Inc.
9805 Willows Road
Redmond, Washington 98052
Norwest Bank Minnesota,
National Association, as Trustee
11000 Broken Land Parkway
Columbia, Maryland 21044
Ladies and Gentlemen:
______________________ (the "Purchaser") hereby represents and warrants
to you in connection with its purchase of $_________ in principal amount of the
above-captioned notes (the "Notes") as follows:
1. The Purchaser is purchasing the Notes for its own account or an
account with respect to which it exercises sole investment discretion and it or
such account is a "QIB" ("Qualified Institutional Buyer") and is aware that the
sale to it is being made in reliance on Rule 144A ("Rule 144A") under the
Securities Act of 1933, as amended ("Securities Act") and is acquiring such
Notes for investment and not with a view to, or for offer or sale in connection
with, any distribution (within the meaning of the Securities Act) or
fractionalization thereof or with any intention of reselling the Notes or any
part thereof, subject to any requirement of law that the disposition of its
property or the property of such account or accounts be at all times within its
or their control and subject to its or their ability to resell such Notes
pursuant to Rule 144A.
2. The Purchaser acknowledges that the Notes have not been and will
not be registered under the Securities Act and may not be sold within the United
States or to, or for the account or benefit of, U.S. persons except as permitted
below.
3. If the Purchaser is a person other than a foreign purchaser outside
the United States, it agrees that (i) if it should reoffer, resell, pledge or
otherwise transfer its Note prior to the second anniversary of the later of (a)
the original issuance of such Note (or any predecessor Note), and (b) the sale
of such Note (or any predecessor Note) by the Issuer or any affiliate of the
Issuer (computed in accordance with paragraph (d) of Rule 144 under the
Securities Act), or
<PAGE>
(ii) if it was at the date of such transfer or during the three months preceding
such date of transfer an affiliate of the Issuer (a) it will do so in compliance
with any applicable state securities or "Blue Sky" laws and only (A) to the
Issuer or (B) in compliance with Rule 144A, and only if a certificate in the
form of Exhibit B to the Indenture is delivered by the transferee to the
Trustee, and (b) it will give the transferee notice of any restrictions on
resale of such Note.
4. The Purchaser understands that the Notes, unless otherwise agreed
by the Issuer and the Holder thereof, will bear a legend to the following
effect:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE ISSUER
THAT THIS NOTE MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY
PREDECESSOR NOTE HERETO) OTHER THAN IN COMPLIANCE WITH THE SECURITIES
ACT AND OTHER APPLICABLE LAWS (1) TO TRENDWEST RESORTS, INC.
("TRENDWEST") OR ANY OF ITS AFFILIATES CONTROLLED BY TRENDWEST OR (2)
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO AN INSTITUTIONAL
INVESTOR THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A, OR PURCHASING FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER WHOM THE HOLDER HAS
INFORMED, IN EACH CASE, THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, AND UPON THE RECEIPT BY THE ISSUER
OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE ISSUER THAT SUCH RESALE,
PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS.
5. The Purchaser has received the information, if any, requested by it
pursuant to Rule 144A, has had full opportunity to review such information and
has received all additional information necessary to verify such information.
6. The Purchaser (i) has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment in the Notes, and (ii) has the ability to bear the economic risks of
its prospective investment and can afford the complete loss of such investment.
7. The Purchaser understands that the Issuer, the Initial Purchaser
and others will rely upon the truth and accuracy of the foregoing
acknowledgments, representations and agreements and agrees that if any of the
foregoing acknowledgments, representations or agreements deemed to have been
made by it are no longer accurate, it will promptly notify the Issuer and the
Initial Purchaser. If it is acquiring any Notes as a fiduciary or agent for one
or more investor accounts, it represents that it has sole investment discretion
with respect to each such account and it has full power to make the foregoing
acknowledgments, representations and agreements on behalf of such account.
<PAGE>
8. Either (a) The Purchaser will not acquire the Notes with the assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") which is subject to
Title I of ERISA or any "plan" as defined in Section 4975 of the Code or (b) no
non-exempt "prohibited transaction" under Section 406 of ERISA or Section 4975
of the Code will occur in connection with our acquisition or holding of the
Notes.
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>
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 August 1, 1999, among TRI Funding III, Inc. (the "Issuer"), Trendwest
Resorts, Inc. (the "Servicer") and Norwest Bank Minnesota National Association,
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 Indenture, which includes information regarding certain
interests in Contracts, the related Receivables and the related Vacation 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:
TRI FUNDING III, INC.
By
Name:
Title:
<PAGE>
ANNEX I
SUPPLEMENT FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
EXHIBIT C-1
FORM OF CLASS A-1 NOTES
<PAGE>
EXHIBIT C-2
FORM OF CLASS A-2 NOTES
<PAGE>
EXHIBIT C-3
FORM OF CLASS A-3 NOTES
<PAGE>
EXHIBIT C-4
FORM OF CLASS B NOTES
<PAGE>
EXHIBIT C-5
FORM OF CLASS C NOTES
<PAGE>
EXHIBIT C-6
FORM OF CLASS D NOTES
<PAGE>
[Date]
Exhibit D
Note Owner Certificate
(Confirmation of Party Requesting Information)
<PAGE>
[Date]
[Norwest Bank Minnesota, National Association, [Servicer]
as Trustee
11000 Broken Land Parkway
Columbia, Maryland 21044]
Re: TRI Funding III, Inc. Receivables-Backed Notes, Series 1999-1
Ladies and Gentlemen:
This letter is delivered to you in connection with a request for
information by the undersigned beneficial holder (the "Holder") or the
undersigned prospective transferee (the "Transferee") of Class ___ Notes (the
"Notes"). The Notes were issued pursuant to the Indenture, dated as of August 1,
1999 (the "Indenture"), by and between TRI Funding III, Inc., as issuer (the
"Issuer"), Trendwest Resorts, Inc., as servicer (the "Servicer"), and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee"). All terms used
herein and not otherwise defined shall have the meanings set forth in the
Indenture. The undersigned hereby certifies, represents, and warrants to you,
that:
INITIAL BOX AS APPLICABLE:
1. _____ In the case of a request for
information by a direct or beneficial holder
of Notes: the undersigned is a direct or
beneficial holder of Notes and is requesting
the information solely for use in evaluating
such party's investment in the Notes and
will otherwise keep such information
confidential in accordance with its standard
procedures for such information.
2. _____ In the case of a request for
information by a prospective transferee: (i)
the undersigned holder is a direct or
beneficial holder of Notes and undersigned
the requesting party is a prospective
transferee of the undersigned holder's Notes
and (ii) the undersigned requesting party is
a prospective transferee of Notes, is
requesting the
information solely for use in evaluating a possible
investment in Notes and will otherwise keep
such information confidential in accordance
with its standard procedures for such
information.
<PAGE>
IN WITNESS WHEREOF, ______________________ has caused this Certificate
Agreement has been executed this _____ day of _________________, 19___.
[-------------------------------------]
[HOLDER]
By:
Name:_________________________________
Title:________________________________
[-------------------------------------]
[TRANSFEREE]
By:
Name:__________________________________
Title:_________________________________
<PAGE>
SCHEDULE A
CONTRACT SCHEDULE
<PAGE>
SCHEDULE B
TARGETED PRINCIPAL BALANCE
Exhibit 10.46
SERVICING AGREEMENT
among
TRI FUNDING III, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer" or "Trendwest")
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
("Trustee")
Dated as of August 1, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS............................................................................2
Section 1.01. Defined Terms..........................................................................2
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. Local Bank Account, ACH Payments and Servicer Remittances.............................10
Section 3.04. Property Management...................................................................11
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 AND THE ISSUER...........................................................19
Section 5.01. Servicer Indemnification..............................................................19
Section 5.02. Corporate Existence; Reorganizations..................................................19
Section 5.03. Limitation on Liability of the Servicer and Others....................................20
Section 5.04. The Servicer Not to Resign............................................................20
Section 5.05. Issuer Indemnification................................................................21
ARTICLE 6 SERVICING TERMINATION.................................................................21
<PAGE>
Section 6.01. Servicer Events of Default............................................................21
Section 6.02. Appointment of Successor Servicer.....................................................24
Section 6.03. Notification to Noteholders...........................................................24
Section 6.04. Waiver of Past Defaults...............................................................24
Section 6.05. Effects of Termination of Servicer....................................................25
Section 6.06. No Effect on Other Parties............................................................25
ARTICLE 7 [RESERVED]............................................................................26
ARTICLE 8 MISCELLANEOUS PROVISIONS..............................................................26
Section 8.01. Termination of the Servicing Agreement................................................26
Section 8.02. Amendments............................................................................26
Section 8.03. Governing Law.........................................................................27
Section 8.04. Notices, etc., to Trustee, Issuer and Servicer........................................27
Section 8.05. Notices and Other Documents to Noteholders; Waiver....................................28
Section 8.06. Severability of Provisions............................................................28
Section 8.07. Binding Effect........................................................................29
Section 8.08. Article Headings and Captions.........................................................29
Section 8.09. Legal Holidays........................................................................29
Section 8.10. Assignment for Security for the Notes.................................................29
Section 8.11. No Servicing Assignment...............................................................29
Section 8.12. Counterparts..........................................................................29
Section 8.13. Parties Will Not Institute Insolvency Proceedings.....................................29
Signatures.......................................................................................................30
</TABLE>
EXHIBIT A -- Form of Monthly Servicer's Report
EXHIBIT B -- Permitted Changes to Property Management Agreement
EXHIBIT C -- Form of Report of Independent Accountants
<PAGE>
SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of August 1, 1999 (the "Agreement"),
by and among TRI FUNDING III, 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"), and NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, a national banking association 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 August 1, 1999
(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"), TRI Funding II, Inc., a Delaware corporation ("TRI
II"), TRI Funding Company I, L.L.C., a Delaware limited liability company ("TRI
I"), TW Holdings II, Inc., a Delaware corporation ("TW II"), and TW Holdings,
Inc., a Nevada corporation ("TW Holdings"), have entered into a Receivables
Purchase Agreement, dated as of August 1, 1999 (as amended and supplemented from
time to time, the "Receivables Purchase Agreement"), providing for, among other
things, the sale by Trendwest, TRI I, TRI II, TW II and TW Holdings to the
Issuer of the Assets, as defined in the Receivables Purchase Agreement. Under
the terms and conditions set forth in the Indenture, the Issuer is and will be
pledging such Assets to the Trustee as security for the Notes. As a precondition
to the effectiveness of the Receivables Purchase Agreement, the Receivables
Purchase Agreement requires that the Servicer, the Issuer and the Trustee enter
into this Agreement to provide for the servicing of the 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 Receivables Purchase Agreement, and the Servicer
agrees that all covenants and agreements made by the Servicer herein with
respect to the 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.
1
<PAGE>
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.
"Assets" shall have the meaning specified in the Receivables Purchase
Agreement.
"Collateral Agent Agreement" shall mean the Collateral Agent Agreement,
dated as of August 1, 1999, among Sage Systems, Inc., as Collateral Agent, the
Trustee, the Issuer and Trendwest, as amended and supplemented from time to
time.
"Collateral Agent Files" shall have the meaning specified in the
Receivables Purchase Agreement.
"Contract Files" shall have the meaning specified in the Receivables
Purchase Agreement.
"Independent Accountants" shall mean KPMG Peat Marwick or another firm
of public accountants of nationally recognized standing; 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 III, 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.
"Local Bank Account" shall mean the account established by the Servicer
at the Local Bank, into which account collections with respect to the Contracts
will be deposited by the Servicer.
"Local Bank" shall mean Commerce Bank of Washington (or an affiliate
thereof), and its successors and assigns.
2
<PAGE>
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof, a form of which is attached hereto as
Exhibit A.
"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 Issuer, any authorized representative of the
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.
"Receivables Purchase Agreement" shall mean the Receivables Purchase
Agreement, dated as of the date hereof, among Trendwest, TW Holdings, TRI I, TRI
II, TW II and the Issuer as the same may be amended or modified from time to
time, together with any annexes, appendices, exhibits or schedules thereto and
including the Asset Assignment and any Subsequent Asset 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, WorldMark, Trendwest
and its subsidiaries, provided, however, if Trendwest is no longer acting as
Servicer, then "Reported Company" shall also mean any successor Servicer
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.
"Servicer" 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.
3
<PAGE>
"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 Assets, as
identified on the list of Servicing Officers furnished by the Servicer to the
Trustee and the Noteholders from time to time.
"Substitution Criterion" shall have the meaning specified in the
Receivables Purchase Agreement.
"Substitute Receivable" shall have the meaning specified in the
Receivables Purchase Agreement.
"TRI I" shall mean TRI Funding Company, L.L.C., a Delaware limited
liability company, and its permitted successors and assigns.
"TRI II" shall mean TRI Funding II, Inc., a Delaware corporation, and
its permitted successors and assigns.
"Trustee" shall initially mean Norwest Bank Minnesota, National
Association, 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.
"TW Holdings" shall mean TW Holdings, Inc., a Nevada corporation, and
its permitted successors and assigns.
"TW II" shall mean TW Holdings II, Inc., a Delaware corporation, and
its permitted successors and assigns.
"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, which shall survive the Closing Date:
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(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 Vacation 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
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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 and coverage under an errors and omissions
policy.
(h) ERISA. Except for one 401(K) plan, the Servicer does
not have or maintain any pension plans.
(i) Year 2000. The Servicer has reviewed its computer systems
relating to the collections of the Receivables, and such systems are
Year 2000 compliant.
Section 2.02. Covenants. (a) The Servicer covenants as to the Assets:
(i) The Servicer shall not release or assign any Lien in
favor of the Trustee on any Receivables or the Vacation 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 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 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
that terminates prior to the Stated Maturity one month beyond the
Stated Maturity of the Notes.
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(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 Vacation 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 and coverage under an errors and omissions policy.
(d) Trendwest and the Servicer, if not Trendwest, 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 Vacation Credits, the
enforcement of the Trustee's security interest in the Receivables and the
Vacation Credits granted pursuant to the Indenture, and, if applicable, the
resale of the Vacation Credits, each in accordance with applicable law and the
standards and procedures set forth in this Agreement and any related provisions
of the Indenture 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, the
Noteholders and the Rating Agencies with respect to payments and using its best
efforts to maintain the perfected security interest of the Trustee in the Trust
Estate (except with respect to the Vacation Credits). Subject to the terms and
conditions of this Agreement, the Servicer (at its expense), acting alone or
through a 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
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Vacation 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, 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 Collateral
Agent Files and the Contract Files. Subject to the terms and conditions of this
Agreement, the Servicer, 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, the
Servicer, shall not, except pursuant to 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, with any powers of
attorney and other documents necessary or appropriate to enable the Servicer to
carry out their servicing and administrative duties hereunder, and the Trustee
shall not be responsible for the Servicer's application thereof. Notwithstanding
any delegation of its responsibilities hereunder, the Servicer shall remain
primarily liable for the full performance of its obligations hereunder.
(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 Vacation
Credits, including without limitation, the taking of appropriate
actions to foreclose or otherwise liquidate any such Defaulted
Contract, together with the related Vacation Credits and to enforce the
Issuer's rights in or under 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
Vacation Credits received by the Servicer shall be deposited in the
Local Bank 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
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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, Section 4.03 of the Indenture and the
definition of Eligible Contract;
(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; provided, however, that (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, decrease the
interest rate, defer the payment of any principal or interest or any
Scheduled Payment, reduce the Collateral Value of such Contract (except
in connection with actual payments attributable to such Collateral
Value), or prevent the complete amortization of the Collateral Value of
such Contract 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 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 Vacation Credits
pursuant to this Agreement, the Servicer 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, the Servicer 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. The Servicer shall punctually
perform all of its obligations
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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. Local Bank Account, ACH Payments and Servicer Remittances.
(a) The Servicer has previously instructed (or, with respect to Substitute
Contracts and Subsequent Contracts, will have instructed) each Obligor to remit
his or her payments to a third party agent of the Servicer. The Servicer shall
cause such agent to deposit, within one Business Day, all payments for principal
and interest on the Receivables that it receives into an account (the "Local
Bank Account") maintained at the Local Bank in the name of, and in the sole
control of, such agent. In the event that a third party (which may not include
any Affiliate of Trendwest) is no longer acting as an agent for the purposes of
collecting payments relating to the Trust Estate, the Servicer will establish a
lockbox account in the name of the Trustee with a lockbox bank and direct the
Obligors to make all payments to such lockbox account. The Servicer shall cause
payments made by automated clearing house debit to be deposited directly into
the Local Bank Account from the Obligor's relevant account. On each Business
Day, the Servicer shall, or shall cause the Local Bank Account Bank to, transfer
all amounts in the Local Bank Account collected relating to the Contracts and
the Receivables (including the purchase price thereof) to the Collection
Account, which shall be an Eligible Account at the Trustee in the name of the
Trustee on behalf of the Noteholders. The Trustee, based solely on information
set forth in each Monthly Servicer's Report, shall cause the amounts in the
Collection Account to be withdrawn from the Collection Account on related
Payment Date in an amount necessary to make the distributions set forth in
Section 12.02(d) or 12.02(e) of the Indenture on such Payment Date.
(b) Except as otherwise provided in this Agreement, the Servicer, as
agent of the Issuer, shall remit for deposit in the Local Bank 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:
(i) all payments made under the Contracts relating to the
Receivables due after the Cut-Off Date, including prepayments but
excluding taxes, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries; and
(iii) the Purchase Price of any Contract purchased by the
Servicer or the Issuer, to the extent received by the Servicer.
The Servicer shall hold in trust for the benefit of the Holders of the
Notes any payment it receives relating to items (i) through (iii) above until
such time as the Servicer transfers any such payment to the Local Bank Account
Bank for deposit in the Local Bank Account. Any such amounts held in the Local
Bank Account shall be held in trust for the benefit of the Noteholders.
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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 Outstanding Notes of the Controlling Class 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 to perfect the security interests of
the Trustee in the Trust Estate 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 the Notes, the Servicer
shall cause searches to be conducted in such offices and promptly deliver the
results of such searches to the Trustee.
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 under this Agreement shall not be subject to any
defense, counterclaim or right of offset which the Servicer has or may have
against the Issuer, the Trustee or any Noteholder whether in respect of this
Agreement, the Indenture, the Notes, the Receivables Purchase Agreement, any
Contract, Receivable, Vacation Credit or otherwise.
Section 3.09. Servicing Compensation. As compensation for the
performance of its obligations under this Agreement, the Servicer shall be
entitled to receive the Servicer Fee. The Servicer Fee shall be paid monthly,
commencing on the Initial Payment Date and terminating on the first to occur of
(i) the receipt of the last Scheduled Payment and related Residual Proceeds with
respect to the last remaining Contract, (ii) the receipt of Recoveries with
respect to the last remaining Contract, or (iii) the date on which the Notes are
paid in full. The Servicer Fee shall be paid by the Issuer to the Servicer at
the times and in the priority as set forth in the Indenture. 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
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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, in accordance with Section 12.02 of the Indenture,
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, from amounts received as Recoveries from any Defaulted Contracts.
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 Vacation 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 Vacation Credits from the
Trustee by remittance of the Purchase Price to the Servicer for deposit in the
Local Bank 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 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 Servicer for deposit in the Local Bank 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 Vacation 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
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 Vacation 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 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) Once the Purchase and Substitution Limit is reached, Trendwest may,
at its option, purchase, in its own right and not as Servicer hereunder, the
Vacation Credits relating to a
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Defaulted Contract at a price equal to 25% of the initial principal balance of
the related Contract. On such Determination Date, Trendwest shall, or, if
Trendwest is not the Servicer, shall cause the Servicer to, immediately deposit
the proceeds of such sale into the Local Bank Account, and such proceeds shall
be deemed to be a collection of principal with respect to such Contract.
(f) Prior to the substitution of any Contract hereunder, the Servicer
shall review its records and determine that there are no liens or other
interests in such Substitute Contract, the related Substitute Receivable and
related Vacation Credits other than that of Trendwest. 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 2:00 p.m., New
York time, on each Determination Date, the Servicer shall deliver to the Issuer,
the Initial Purchaser, the Trustee, each Noteholder and the Rating Agencies the
Monthly Servicer's Report in the form attached as Exhibit A hereto with respect
to the activity in the immediately preceding Due Period. The determination by
the Servicer of such amounts shall, in the absence of manifest error, be deemed
to be presumptively correct and the Trustee shall be protected in relying upon
the same without any independent check or investigation. 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. 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
Servicer 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 Servicer'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
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 Vacation Credits, whether sold or unsold; the total number
of Vacation Credits sold; and the number of developed properties of the Club;
the name of each such developed property and the total number of Vacation
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 Initial Purchaser, each Holder and the Rating Agencies (and,
upon the request of any Noteholder, to any prospective transferee of any Note):
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(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;
(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 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;
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(v) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default or a Servicer
Event of Default hereunder, a Default or an Event of Default under the
Indenture or Receivables Purchase Agreement, or a Trigger 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 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 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 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 Issuer created Receivables Purchase Agreement
with respect to the 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 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 C 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 Collateral Agent's system), to the effect that such
Independent Accountants have reviewed a statistically significant random sample
(at the 95% confidence level) of the Collateral Agent
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Files and that such reviewed Collateral Agent Files are in the possession of the
Collateral Agent and properly accounted for in the Collateral Agent's records.
(b) For each fiscal year (commencing with the fiscal year ending
December 31, 1999), 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, Initial Purchaser
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, 1999) 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) The
Servicer 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
Trust Estate (including the Contract Schedule) that the Servicer 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 normal operations or customer or employee relations, at offices of
the Servicer designated by the Servicer. If a Servicer Event of Default 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 the 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 the Trust Estate.
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(c) The Servicer will maintain accounts and records as to each
respective Contract serviced by the Servicer 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 Collection Account in respect of such Contract.
(d) The Servicer will maintain all of its computerized accounts and
records so that, from and after the time of the acquisition of an interest in
the Assets by the Issuer, the Servicer's accounts and records (including any
back-up computer archives) that refer to any Contract, Receivable or Vacation
Credits indicate clearly that the Receivables are owned by the Issuer and are
pledged, together with the Issuer's security interest in the related Vacation
Credits, to the Trustee for the benefit of the Noteholders. 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 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, (vii) the Rating Agencies or (viii) 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
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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 Local Bank 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 Collateral Agent Agreement. Upon receipt of such delivery
request, the Collateral Agent shall, within 7 days of such request by the
Servicer, release such Contract to the Servicer in accordance with the
Collateral Agent 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 Vacation 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 related thereto and shall
determine the following:
(i) that such Monthly Servicer's Report is complete on its
face; and
(ii) that the amounts credited to and withdrawn from the
Collection Account, the Capitalized Interest Account, Prefunding
Account and the Reserve Account, as set forth in the records of the
Trustee, are the same as the amount set forth in such Monthly
Servicer's Report.
(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 discrepancy.
(c) Based solely on the information included in the Contract Schedule
delivered on the Closing Date and the electronic reports provided on each
Payment Date thereafter, the Trustee
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shall determine that any Substitute Contracts delivered under Section 3.10
satisfy the Substitution Criterion as defined in 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 and shall have no liability for any action taken
or omitted by the Servicer.
(e) The Trustee shall consult fully with the Servicer 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 under Section 6.02 hereof.
ARTICLE 5
THE SERVICER AND THE ISSUER
Section 5.01. Servicer Indemnification. (a) The Servicer shall indemnify
and hold harmless the Trustee, the Issuer, and the 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) 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 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 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
shall keep in full effect its existence and good standing as a corporation in
the State of its incorporation 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 enable the Servicer to perform its
duties under this Agreement, except where the failure to so qualify would not
have a material adverse effect on the Trust Estate or the ability of the
Servicer to perform its duties hereunder; provided, however, that the Servicer
may reincorporate in another State, if to do so would be in the best interests
of the Servicer and would not have a material adverse effect upon the
Noteholders.
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(b) The Servicer shall not (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, 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, under this Agreement; provided that nothing herein shall prevent the
Servicer from selling contracts and receivables which are not Assets pursuant to
a receivables financing.
Section 5.03. Limitation on Liability of the Servicer and Others. Except
as provided in Section 5.01, the Servicer, and any of the officers, directors,
employees or agents of the Servicer shall not be under any liability for any
action taken or for refraining from the taking of any action by the Servicer in
its capacity as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer 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 explicitly set forth in this Agreement) in the performance of its
duties hereunder. The Servicer and any officer, director, employee or agent of
the Servicer 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. In the event the Servicer performs any
activities beyond the requirements of this Agreement, it shall have the option
but will not be required to perform such activities in the future.
Section 5.04. The Servicer Not to Resign. (a) The Servicer (except as
set forth in the last sentence of this subsection (a)) shall not 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 that by reason of change
in applicable legal requirements, with which the Servicer cannot reasonably
comply, the continued performance by the Servicer 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.
(b) No such resignation shall become effective until a successor
Servicer, acceptable to the Rating Agencies and to Holders of not less than 51%
in aggregate principal amount of the Outstanding Notes of the Controlling Class,
shall have assumed the responsibilities and obligations of the Servicer
hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties and
obligations of the Servicer 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
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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 (but solely from the amounts to be distributed as set
forth in Sections 12.02(d)(xxi), 12.02(e)(xvi) and 12.03(d)(ii) of the
Indenture) from and against any loss, liability, expense, damage or injury
suffered or sustained by the Servicer, 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 activities
hereunder; provided, however, that the Issuer shall not indemnify the Servicer
if the Servicer'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 for any amounts for which the Servicer 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) Any of the following acts
or occurrences shall constitute a Servicer Event of Default:
(i) any failure by the Servicer (A) to deliver to the Local
Bank for deposit in the Local Bank Account or (B) to deliver or cause
to be delivered to the Trustee for deposit in the Collection Account
any proceeds or payments received from an Obligor or in respect of the
Trust Estate and required to be so delivered under the terms of the
Indenture and this Agreement that continues unremedied until 2:00 p.m.,
New York time, on the second successive Business Day following such
failure; or provided, however, that the Trustee, upon receiving actual
knowledge of such failure, 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
(ii) any failure by the Servicer to deliver a Monthly
Servicer's Report pursuant to Section 4.01 hereof that continues
unremedied until 2:00 p.m., New York 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 2:00 p.m.,
New York 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
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(iii) any failure by the Servicer to remit any Purchase Price
received by it to the Trustee that continues unremedied until 5:00
p.m., New York time, the following Business Day; provided, however,
that if the Servicer has not remitted any Purchase Price received by it
to the Trustee by 3:00 p.m., New York time, on the Determination Date
and the Trustee has actual knowledge 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 2:00 p.m., New York 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 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
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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.
(b) If a Servicer Event of Default shall have occurred and be
continuing, the Trustee shall, upon written direction of the Holders of Notes
representing not less than 66-2/3% in principal amount of the Outstanding Notes
of the Controlling Class, by notice (the "Servicer Termination Notice") given in
writing to the Servicer terminate all, but not less than all, of the rights and
obligations (except as expressly provided herein) of the Servicer under this
Agreement. 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 more than 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 30 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, together with a
description of its efforts to so perform its obligations.
(c) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes or the Contracts 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, 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, or
have been deposited by the Servicer or thereafter received with respect to
Contracts. To assist the successor Servicer in enforcing all rights under the
Contracts, the outgoing Servicer, at its own expense (including, without
limitation, any costs or expenses associated with the complete transfer of all
servicing data and the completion, correction or manipulation of such servicing
data as may be required by the successor Servicer to correct any errors or
insufficiencies in the servicing data or otherwise to enable the successor
Servicer to
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service the Contracts properly and effectively to the successor Servicer in such
form as the successor Servicer may reasonably request), shall transfer its
records (electronic and otherwise) relating to such Contracts and shall transfer
the related Contracts (to the extent not held by the Trustee) and all other
records, correspondence and documents relating to the 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 resigns as Servicer pursuant to Section 5.04 hereof
or is terminated as Servicer pursuant to Section 6.01 hereof, the Trustee shall,
within 90 days of the delivery of a Servicer Termination Notice, at the
direction of Holders of Notes representing not less than 66-2/3% in principal
amount of the Outstanding Notes of the Controlling Class, and with the consent
of the Rating Agencies, appoint a successor Servicer; provided, however, pending
the appointment of the successor Servicer, the Trustee shall act as the
successor Servicer hereunder.
(ii) The successor Servicer shall be the successor in all respects to
the Servicer in its capacity as Servicer 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
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 the outgoing Servicer of any of its representations and warranties
contained herein or in any related document or agreement. Subject to the consent
of the Rating Agencies and the Holders representing not less than 66-2/3% in
principal amount of the Outstanding Notes of the Controlling Class, 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 on and after the time such
Servicer receives the Servicer Termination Notice. Such successor Servicer shall
be entitled to the Servicer Fee in connection with acting as Servicer hereunder.
(b) Each of the Servicer, the Issuer, the Trustee and any successor
Servicer, shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Upon any succession, such successor
Servicer shall notify the Obligors that it has been appointed Servicer under
this Agreement with respect to the Contracts.
Section 6.03. Notification to Noteholders. The Servicer shall promptly
notify the Issuer, the Trustee and the Rating Agencies of any Servicer Event of
Default upon actual knowledge thereof by an officer of the Servicer. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article 6, the Trustee shall give prompt written notice thereof to the
Noteholders at their respective addresses appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Trustee shall, at the
direction of the Holders of Notes representing not less than 66-2/3%
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in principal amount of the Outstanding Notes of the Controlling Class, on behalf
of all Noteholders, waive any default by the Servicer 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. 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, the predecessor Servicer shall remit any
Scheduled Payments and any other payments or proceeds that such predecessor may
receive pursuant to any Contract or otherwise to such successor after such date
of appointment.
(b) After the delivery of a Servicer Termination Notice, the outgoing
Servicer shall have no further obligations with respect to the management,
administration, servicing, enforcement, custody or collection of the Contracts,
and the successor Servicer 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. 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 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 and the Receivables
Purchase Agreement, other than Trendwest's rights, powers, duties and
obligations as Servicer therein, shall remain unaffected by such termination or
appointment and shall remain in full force and effect thereafter.
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ARTICLE 7
[RESERVED]
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of the Servicing Agreement. (a) Absent a
termination pursuant to Section 6.01, the respective duties and obligations of
the Servicer, 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), the Servicer shall pay all monies with respect to the
Receivables and Vacation Credits held by the Servicer, as the case may be, and
to which the Servicer is not entitled, to the Issuer or upon the Issuer's order.
The Servicer'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
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 and the Servicer, with the consent of the Trustee, and the
Holders of not less than 66-2/3% in principal amount of the Outstanding Notes of
the Controlling Class 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 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 the 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 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,
(iv) modify this Section 8.02 or Sections 6.02 or 6.04 hereof, (v) cause the
downgrade of the then current ratings assigned by the Rating Agencies with
respect to the Notes.
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(b) Promptly after the execution of any amendment, the Servicer shall
send to the Trustee, the Rating Agencies 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 and Servicer. 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 11000 Broken Land Parkway, Columbia,
Maryland 21044 (facsimile number (410) 884-2363), Attention: Corporate
Trust Services, Securities Administration, TRI Funding 1999-1, with a
copy to the Trustee at Sixth Street and Marquette Avenue, MAC
N9311-161, Minneapolis, MN 55479 (facsimile number (612) 667-3539),
Attention: Corporate Trust Services, Asset-Backed Administrations or at
any other address previously furnished in writing to the Issuer and the
Servicer; or
(b) to the Issuer at TRI Funding III, Inc., 9805 Willows
Road, Redmond, Washington 98052 (facsimile number (425) 498-3050),
Attention: Vice President, 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., 9805 Willows
Road, Redmond, Washington 98052 (facsimile number (425) 498-3050),
Attention: Executive Vice President, or at any other address previously
furnished in writing to the Trustee, the Noteholders and the Issuer; or
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<PAGE>
(d) to DCR at 17 State Street, 12th Floor, New York, New York
10004 (facsimile number (212) 908-0355), Attention: Asset-Backed
Securities/Timeshare Group or at any other address previously furnished
in writing to the Trustee and the Issuer; or
(e) to Fitch IBCA, Inc., at One State Street Plaza, New York,
New York 10004 (facsimile (212) 514-9879), Attention: Asset-Backed
Securities or at any other address previously furnished in writing to
the Trustee, the Noteholders, 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.
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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 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 Outstanding Notes of the Controlling Class.
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. Parties Will Not Institute Insolvency Proceedings. During
the term of this Agreement and for one year and one day after the termination
hereof, none of the parties hereto or any Affiliate thereof or any Holder of
Outstanding Notes (and each Holder of Outstanding Notes so agrees by acceptance
of a Note) will file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other proceeding under any federal or state bankruptcy or similar law against
the Issuer.
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IN WITNESS WHEREOF, the Issuer, Trendwest, the Servicer 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 FUNDING III, INC., as Issuer
By
Name:
Title:
TRENDWEST RESORTS, INC., as Servicer and for itself
By
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
By
Name:
Title:
30
<PAGE>
EXHIBIT A
FORM OF
MONTHLY SERVICER'S REPORT
<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.
<PAGE>
EXHIBIT C
FORM OF REPORT OF INDEPENDENT ACCOUNTANTS
EXECUTION COPY
TRI FUNDING III, INC.
RECEIVABLES-BACKED NOTES, SERIES 1999-1
$26,000,000 6.695% CLASS A-1 NOTES
$22,500,000 7.230% CLASS A-2 NOTES
$55,904,000 7.560% CLASS A-3 NOTES
$18,249,000 7.460% CLASS B NOTES
$19,947,000 7.685% CLASS C NOTES
$17,400,000 8.590% CLASS D NOTES
PURCHASE AGREEMENT
August 18, 1999
Prudential Securities Incorporated
as the Initial Purchaser
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
Section 1. Notes. TRI Funding III, Inc. (the "Issuer"), a
wholly owned special purpose subsidiary of Trendwest Resorts, Inc. ("TWRI"),
proposes to issue Receivables-Backed Notes, Series 1999-1, Class A-1, Class A-2,
Class A-3, Class B, Class C and Class D (collectively, the "Notes"). The Notes
will be issued pursuant to an indenture, dated as of August 1, 1999 (the
"Indenture"), by and among the Issuer, TWRI, as servicer and Norwest Bank
Minnesota, National Association, as trustee (the "Trustee"). The Notes will be
principally secured by, among other things, specific payments ("Receivables")
required to be made under certain consumer retail installment sale contracts
("Contracts") sold to the Issuer by TWRI, TW Holdings, Inc. ("TWHI"), TW
Holdings II, Inc. ("TWHII"), TRI Funding Company I, L.L.C., ("TRIFI") and TRI
Funding II, Inc. ("TRIFII" and together with TWRI, TWHI, TWHII and TRIFI, the
"Sellers") pursuant to a receivables purchase agreement, dated as of August 1,
1999 (the "Receivables Purchase Agreement"), by and among the Sellers and the
Issuer (collectively, the "Trendwest Entities"). The Notes are to be in such
form and bear interest and be payable on such terms as prescribed in the
Indenture. Capitalized terms used herein but not otherwise defined shall have
the meanings set forth in the Indenture.
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Section 2. Purchase of Notes. Subject to the terms and
conditions and in reliance upon the representations and warranties and
agreements set forth herein, (A) the Issuer agrees to sell all of the Notes to
Prudential Securities Incorporated (the "Initial Purchaser") as hereinafter
provided, and (B) the Initial Purchaser agrees to purchase the Notes, on the
Closing Date (as defined in Section 3 below) such Notes at the purchase prices
listed on Exhibit A attached hereto. At the time of the delivery of the Notes to
the Initial Purchaser, the Initial Purchaser shall make such payment to the
Issuer of such purchase price (i) by wire transfer in immediately available
funds to such account as the Issuer shall designate at least one Business Day
prior to the Closing Date, or (ii) in such other manner as agreed upon by the
Issuer and the Initial Purchaser.
Section 3. Delivery. The closing of the transactions
contemplated herein will be held at 10:00 am, New York time, at the offices of
Chapman and Cutler, Chicago, Illinois, on or about August 25, 1999 (the "Closing
Date"). Delivery of the Notes shall be made in the form of one or more global
certificates delivered to The Depository Trust Company on the Closing Date and
shall be registered in the name of Cede & Co. The Notes will be available for
examination at least one Business Day prior to the Closing Date.
Section 4. Representations and Warranties of the Trendwest
Entities. Each of the Issuer, and, as indicated in sub-sections (ii), (iii),
(v), (vi), (x) and (xii) below, Trendwest represent and warrant, to the Initial
Purchaser, as of the Closing Date, that:
(i) The Offering Memorandum dated August 23, 1999 (the
"Memorandum") does not and will not, and any amendments thereof or
supplement thereof and any additional information and documents
concerning the Notes delivered by or on behalf of the Issuer to
prospective purchasers of the Notes (collectively, such information and
documents, the "Additional Offering Documents"), each as of their
respective dates, and any oral statements made by the Issuer to any
prospective purchaser of the Notes did not or will not, each as of its
issue date or date on which such statement was made and as of the
Closing Date, include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in
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<PAGE>
light of the circumstances under which they were made, not misleading.
(ii) Each Trendwest Entity is a corporation or a
limited liability company duly organized, validly existing and in good
standing under the laws of its state of incorporation or formation, has
all power and authority necessary to own or hold its properties and
conduct its business in which it is engaged as described and as
contemplated in the Memorandum and has all licenses necessary to carry
on its business as it is now being conducted and is licensed and
qualified in each jurisdiction in which the conduct of its business
requires such licensing or qualification (except where the lack of
licensing or qualification would not and does not materially and
adversely affect the business, operations, property or financial
obligations of such Trendwest Entity, the ability of such Trendwest
Entity to perform its obligations under this Agreement and the other
Agreements, or the validity or enforceability of this Agreement or any
of the other Agreements (a "Material Adverse Effect")).
(iii) The Indenture, the Receivables Purchase Agreement,
the servicing agreement, dated as of August 1, 1999 (the "Servicing
Agreement"), by and among TWRI, as servicer, the Issuer and the
Trustee, and this Agreement (collectively, the "Agreements") have each
been duly authorized, executed and delivered by each Trendwest Entity,
to the extent each is a party thereto, and, assuming due authorization,
execution and delivery thereof by the other parties thereto, constitute
valid and legally binding obligations of such Trendwest Entity
enforceable against such Trendwest Entity in accordance with their
respective terms to the extent each is a party thereto, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally or
the application of equitable principles in any proceeding, whether at
law or in equity.
(iv) When executed, authenticated and delivered by the
Issuer and the Trustee in accordance with the Indenture and paid for by
the purchasers thereof, the Notes will have been duly executed,
authenticated, issued and delivered and will be entitled to the
benefits of the Indenture.
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<PAGE>
(v) There are no legal or governmental proceedings
pending to which any Trendwest Entity is a party, or of which any
property or assets of any Trendwest Entity is the subject, which, if
determined adversely to such Trendwest Entity, as the case may be would
individually or in the aggregate have a material adverse effect on the
financial position, stockholders' or members' equity or results of
operations of such Trendwest Entity as the case may be or on the
performance by such Trendwest Entity of its obligations hereunder or as
contemplated under each Agreement to which it is a party; and, to the
best knowledge of the Issuer or Trendwest, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others.
(vi) The execution and delivery of the Notes by the
Issuer, the execution, delivery and performance of the Agreements by
each Trendwest Entity to the extent each is a party thereto and the
consummation by each Trendwest Entity of the transactions contemplated
herein and in all documents relating to the Notes will not result in
any breach or violation of, or constitute a default under, any
agreement or instrument to which such Trendwest Entity is a party or to
which any of its properties or assets are subject, except for such of
the foregoing as to which relevant waivers or amendments have been
obtained and are in full force and effect, nor will any such action
result in a violation of the Certificate of Incorporation, By-Laws,
Certificate of Formation or Limited Liability Company Agreement, as
applicable, of such Trendwest Entity, or any law or any order, decree,
rule or regulation of any court or governmental agency having
jurisdiction over such Trendwest Entity or its properties, a breach or
violation of which, or default under which, would have a Material
Adverse Effect on such Trendwest Entity.
(vii) The Issuer is not, and the activities of the
Issuer pursuant to the Indenture will not cause the Issuer to be, an
"investment company" or an entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended.
4
<PAGE>
(viii) Assuming the Initial Purchaser's representations
herein are true and accurate, it is not necessary in connection with
the offer, sale and delivery of the Notes in the manner contemplated by
this Agreement and the Memorandum to register the Notes under the
Securities Act.
(ix) The Notes satisfy the requirements set forth in
Rule 144A(d)(3) under the Securities Act.
(x) At the time of execution and delivery of the
Receivables Purchase Agreement, each Seller owned the related Contracts
and Receivables free and clear of all liens, encumbrances, adverse
claims or security interests ("Liens") and each Seller had the power
and authority to transfer such Contracts and Receivables to the Issuer
and upon execution and delivery of the Receivables Purchase Agreement,
the Issuer will have acquired each Seller's right, title and interest
in and to such Contracts and Receivables free and clear of all Liens.
(xi) Upon the execution and delivery of the Receivables
Purchase Agreement, the Issuer will have the power and authority to
pledge the Contracts and Receivables to the Trustee on behalf of the
Noteholders.
(xii) Each of the representations and warranties of each
Trendwest Entity set forth in each of the Agreements to which it is a
party is true and correct in all material respects.
(xiii) Any taxes, fees and other governmental charges in
connection with the execution and delivery of the Agreements or the
execution, delivery and sale of the Notes have been or will be paid
prior to the Closing Date.
Section 5. Sale of Notes to the Initial Purchaser.
(a) The sale of the Notes to the Initial Purchaser will be made without
registration of the Notes under the Securities Act, in reliance upon
the exemption therefrom provided by Section 4(2) of the Securities Act.
5
<PAGE>
(b) The Initial Purchaser hereby represents, as of
the Closing Date, and warrants to, and agrees with the Issuer that:
(i) The Initial Purchaser is a QIB within
the meaning of Rule 144A under the Securities Act.
(ii) The Initial Purchaser (i) will
initially make offers and sales ("Exempt Resales") of the
Notes purchased hereunder, solely to Persons whom it
reasonably believes to be "qualified institutional buyers" as
defined in Rule 144A under the Securities Act ("QIBs" or
"Exempt Purchasers") and (ii) is aware that the sales to QIBs
are being made in reliance on Rule 144A.
(iii) The Initial Purchaser is not acquiring
the Notes with a view to any distribution thereof that would
violate the Securities Act or the securities laws of any state
of the United States or any other applicable jurisdiction.
(iv) No form of general solicitation or
general advertising (as those terms are used in Regulation D
under the Securities Act) has been or will be used by the
Initial Purchaser or any of its representatives in connection
with the offer and sale of any of the Notes within the United
States (as those terms are used in Regulation D under the
Securities Act).
(v) The Initial Purchaser agrees that, in
connection with the Exempt Resales, it will solicit offers to
buy the Notes only from, and will offer to sell the Notes only
to, Persons it reasonably believes to be Exempt Purchasers.
The Initial Purchaser further agrees that it will sell the
Notes only to Persons who have delivered an investment letter
substantially in the form of Exhibit A to the Indenture.
(vi) The Initial Purchaser also understands
that the Issuer, counsel to the Issuer and counsel to the
Initial Purchaser will rely upon the accuracy and truth of the
foregoing representations and hereby consents to such
reliance.
6
<PAGE>
(vii) One of the following statements is
true and correct: (i) the Initial Purchaser is not an
"employee benefit plan" within the meaning of Section 3(3) of
ERISA or a "plan" within the meaning of Section 4975(e)(1) of
the Code (a "Plan") and it is not directly or indirectly
acquiring the Notes on behalf of, as investment manager of, as
named fiduciary of, as trustee of, or with assets of a Plan,
or (ii) the proposed acquisition or transfer will qualify for
a statutory or administrative prohibited transaction exemption
under ERISA or Section 4975(c)(1) of the Code for which a
statutory or administrative exception is available.
(viii) The Initial Purchaser agrees to treat
the Notes for purposes of federal, state and local income or
franchise taxes (and any other tax imposed on or measured by
income) as indebtedness for such tax purposes.
(ix) No placement agent, broker, finder or
investment banker has been employed by or has acted for the
Issuer or the Initial Purchaser in connection with the
transactions contemplated by this Agreement.
Section 6. Certain Covenants of each Trendwest Entity. Each Trendwest
Entity covenants and agrees with the Initial Purchaser as follows:
(a) If, at any time prior to the 90th day following
the Closing Date, any event involving a Trendwest Entity shall occur as
a result of which the Memorandum (as then amended or supplemented)
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, such
Trendwest Entity will, at the sole cost of such Trendwest Entity,
promptly notify the Initial Purchaser and prepare and furnish to the
Initial Purchaser an amendment or supplement to the Memorandum that
will correct such statement or omission.
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<PAGE>
(b) During the period referred to in Section 6(a),
the Issuer will furnish to the Initial Purchaser, without charge,
copies of the Memorandum (including all exhibits and documents
incorporated by reference therein), the Agreements, and all amendments
or supplements to such documents, in each case as soon as reasonably
available and in such quantities as the Initial Purchaser may
reasonably request.
(c) While any Notes remain outstanding, unless such
Class has been registered, the Issuer will make available, upon
request, to the Initial Purchaser, any holder and any prospective
purchaser of such Notes, the information concerning the Issuer and the
Trust specified in Rule 144A(d)(4) under the Securities Act.
Section 7. Conditions of the Initial Purchaser's Obligations.
The obligations of the Initial Purchaser to purchase the Notes on the Closing
Date will be subject to the accuracy of the representations and warranties of
the Trendwest Entities herein, to the performance by each Trendwest Entity of
its obligations hereunder and to the following additional conditions precedent:
(a) The Notes shall have been duly authorized,
executed, authenticated, delivered and issued, and each of the
Agreements shall have been duly authorized, executed and delivered by
the respective parties thereto and shall be in full force and effect,
and all conditions precedent contained in the Agreements shall have
been satisfied.
(b) The Initial Purchaser shall receive a
certificate, dated the Closing Date, of the President and Chief
Financial Officer or a Senior Vice President of the Issuer, and a
certificate, also dated the Closing Date, from a comparable officer of
TWRI, in each case to the effect that such officer has carefully
examined each of the Agreements and the Memorandum and that, to the
best of such officer's knowledge (i) since the date information is
given in the Memorandum, there has not been any material adverse change
in the condition, financial or otherwise, or in the earnings, results
of operations, business affairs or business prospects of such Trendwest
Entity, as the case may be whether or not arising in the ordinary
course of
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business, or the ability of such Trendwest Entity to
perform its obligations hereunder or under the other Agreements to
which each is a party, (ii) the representations and warranties of such
Trendwest Entity set forth herein and in the other Agreements to which
each is a party are true and correct in all material respects as of the
Closing Date, as though such representations and warranties had been
made on and as of such date, (iii) each Trendwest Entity has complied
with all agreements and satisfied in all material respects all
conditions on its part to be performed or satisfied hereunder and under
the other Agreements to which each is a party, on or prior to the
Closing Date, and (iv) nothing has come to the attention of such
officer that would lead such officer to believe that the Memorandum,
and any amendment thereof or supplement thereto, as of its date and as
of the Closing Date, or any Additional Offering Document contains, as
of its date and as of the Closing Date, an untrue statement of a
material fact or omits to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The Initial Purchaser shall receive
from each Trendwest Entity, such certificates as may be required to be
delivered pursuant to the Agreements.
(c) The (i) Class A-1 Notes, the Class A-2 Notes and
the Class A-3 Notes shall each have been rated no less than "AAA" by
each of Fitch IBCA, Inc. ("Fitch") and Duff & Phelps Credit Rating Co.
("DCR"), (ii) the Class B Notes shall have been rated no less than "AA"
by each of Fitch and DCR, (iii) the Class C Notes shall have been rated
no less than "A" by each of Fitch and DCR, (iv) the Class D Notes shall
have been rated no less than "BBB" by Fitch, and (v) none of such
ratings shall have been rescinded, and no public announcement shall
have been made by the respective rating agencies that the rating of the
any Class of Notes has been placed under review.
(d) The Initial Purchaser shall have received an
opinion, dated the Closing Date, of Charles A. Bott, in-house counsel
to each Trendwest Entity, with respect to such matters as the Initial
Purchaser may reasonably require.
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(e) On the date of the Memorandum, Deloitte & Touche
LLP shall have furnished to the Initial Purchaser an "agreed upon
procedures" letter, dated the date of delivery thereof, in form and
substance reasonably satisfactory to the Initial Purchaser, with
respect to certain financial and statistical information contained in
the Memorandum.
(f) The Initial Purchaser shall have received an
opinion, dated the Closing Date, of Timothy J. Carlin, in-house counsel
to the Trustee and Hunton & Williams, outside counsel to the Trustee,
with respect to such matters as the Initial Purchaser may reasonably
require and in form and substance satisfactory to the Initial
Purchaser.
(g) The Initial Purchaser shall have received
opinions of Chapman and Cutler, counsel to each Trendwest Entity, with
respect to certain matters, including non-consolidation, true-sale,
security interest, corporate authority, enforceability, securities law
and tax matters, and in form and substance reasonably satisfactory to
the Initial Purchaser.
(h) The Initial Purchaser shall have received an
opinion of in-house counsel of Interval International, Inc., the parent
of Sage Systems, Inc., with respect to such matters as the Initial
Purchaser may require.
(i) The Initial Purchaser shall have received from
the Trustee a certificate signed by one or more duly authorized
officers of the Trustee, dated the Closing Date, in customary form.
(j) Each Trendwest Entity shall have furnished to
the Initial Purchaser and its counsel such further information,
certificates and documents as the Initial Purchaser and its counsel may
reasonably have requested, and all proceedings in connection with the
transactions contemplated by this Agreement and all documents incident
hereto shall be in all material respects reasonably satisfactory in
form and substance to the Initial Purchaser and its counsel.
If any of the conditions specified in this Section 7 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and
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certificates mentioned above shall not be in all material respects reasonably
satisfactory in form and substance to the Initial Purchaser, this Agreement and
all of the Initial Purchaser's obligations hereunder may be canceled by the
Initial Purchaser at or prior to delivery of and payment for the Notes. Notice
of such cancellation shall be given to the Issuer in writing, or by telephone or
telegraph confirmed in writing.
Section 8. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Initial Purchaser, by notice given
to the Issuer prior to delivery of and payment for the Notes, if prior to such
time (i) trading in securities generally in the New York Stock Exchange shall
have been suspended or materially limited or any setting of minimum prices for
trading on such exchange has occurred, (ii) there has been, since the respective
dates as of which information is given in the Memorandum, any material adverse
change in the condition, financial or otherwise, or in the properties or the
earnings, business affairs or business prospects of the Trendwest Entities,
considered as one enterprise, whether or not arising in the ordinary course of
business; (iii) a general moratorium on commercial banking activities in New
York shall have been declared by either federal or New York State authorities,
or (iv) there shall have occurred any material outbreak or escalation of
hostilities or other calamity or crises the effect of which on the financial
markets of the United States is such as to make it, in the reasonable judgment
of the Initial Purchaser, impracticable or inadvisable to market the Notes on
the terms and in the manner contemplated by the Memorandum as amended or
supplemented.
Section 9. Indemnification and Contribution. (a) Each of
Trendwest and the Issuer, jointly and severally, agrees to indemnify and hold
harmless the Initial Purchaser and each person, if any, who controls the Initial
Purchaser within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which the Initial Purchaser or such controlling person may become
subject under the Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon: (1) any untrue statement or alleged untrue statement made
by a Trendwest Entity in Section 4 of this Agreement, (2) any untrue statement
or alleged untrue statement
11
<PAGE>
of any material fact contained in (A) the Memorandum or any amendment or
supplement thereto or (B) any application or other document, or any amendment or
supplement thereto, executed by a Trendwest Entity or based upon written
information furnished by or on behalf of a Trendwest Entity filed in any
jurisdiction in order to qualify the Securities under the securities or blue sky
laws thereof or filed with any securities association or securities exchange
(each an "Application"), (3) the omission or alleged omission to state in the
Memorandum or any amendment or supplement thereto, or any Application a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, or (4) any untrue
statement or alleged untrue statement of any material fact contained in any
audio or visual materials prepared by a Trendwest Entity and used in connection
with the marketing of the Notes, including without limitation, slides, videos,
films or tape recordings, and will reimburse, as incurred, the Initial Purchaser
and each such controlling person for any legal or other expenses reasonably
incurred by the Initial Purchaser or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that no Trendwest Entity will be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in Memorandum or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information furnished to the Issuer
by the Initial Purchaser or through the Initial Purchaser specifically for use
therein. This agreement to indemnify will be in addition to any liability which
a Trendwest Entity may otherwise have. No Trendwest Entity will, without the
prior written consent of the Initial Purchaser, settle or compromise or consent
to the entry of any judgment any pending or threatened claim, action, suit or in
proceeding in respect of which indemnification may be sought hereunder (whether
or not the Initial Purchaser or any person who controls the Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent includes an unconditional release the Initial
Purchaser and each such controlling persons from all liability arising out of
such claim, action, suit or proceeding.
12
<PAGE>
(b) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 9. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 9 for any
legal or other expenses, other than reasonable costs of investigation,
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser in the case of
paragraph (a) of this Section 9, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the
13
<PAGE>
indemnified party at the expense of the indemnifying party. After such notice
from the indemnifying party to such indemnified party, the indemnifying party
will not be liable for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party.
(c) In circumstances in which the agreement to indemnify
provided for in the preceding paragraphs of this Section 9 is unavailable or
insufficient to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying parties collectively on the one hand and
the indemnified party on the other from the offering of the Notes, or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying parties collectively on the one hand and the indemnified party
on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Trendwest
Entities, collectively, on the one hand and the Initial Purchaser on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (before deducting expenses) received by the Issuer bear to the total
purchase discounts and commissions received by the Initial Purchaser in
connection with the purchase of the Securities. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Trendwest Entities on the one hand or the Initial Purchaser on the other, the
parties' relative intents, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Trendwest Entities and the
Initial Purchaser agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation or by any
other
14
<PAGE>
method of allocation that does not take into account the equitable
considerations referred to above in this paragraph (d). Notwithstanding any
other provision of this paragraph (d), the Initial Purchaser shall not be
obligated to make contributions hereunder that in the aggregate exceed the
Purchase Price, less the aggregate amount of any damages that the Initial
Purchaser has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls the Initial Purchaser within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act shall have the same rights
to contribution as the Initial Purchaser, and each director of a Trendwest
Entity and each person, if any, who controls such Trendwest Entity within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as such Trendwest Entity, as the case
may be.
Section 10. Severability Clause. Any part, provision,
representation, or warranty of this Agreement which is prohibited or is held to
be void 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.
Section 11. Notices. All communications hereunder will be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by overnight mail, certified mail or registered mail, postage prepaid,
and effective only upon receipt, and if sent to the Initial Purchaser, will be
delivered to Prudential Securities Incorporated, One New York Plaza, New York,
New York, 10292, Attention: General Counsel (with a copy to the Asset Finance
Group), or if sent to a Trendwest Entity will be delivered to such Trendwest
Entity, c/o Trendwest Resorts, Inc., 9805 Willows Road, Redmond, Washington
98052, Attention: General Counsel.
Section 12. Representations and Indemnities to Survive. The
respective agreements, representations, warranties, indemnities and other
statements of each Trendwest Entity and the officers of such Trendwest Entity,
and of the Initial Purchaser
15
<PAGE>
set forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of the Initial
Purchaser, a Trendwest Entity or any of the controlling persons referred to in
Section 9, and will survive delivery of and payment for the Notes.
Section 13. Successors. This Agreement will inure to the
benefit of and be binding upon the parties hereto and Note Owners as defined in
the Indenture and their respective successors and the officers, directors and
controlling persons referred to in Section 9 and their respective successors and
assigns, and, except as specifically set forth herein, no other person will have
any right or obligation hereunder.
Section 14. Applicable Law. THIS AGREEMENT WILL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS CONFLICT OF LAW PROVISIONS.
Section 15. Counterparts, Etc. This Agreement supersedes all
prior or contemporaneous agreements and understandings relating to the subject
matter hereof between the Initial Purchaser and the Trendwest Entities. Neither
this Agreement nor any term hereof may be changed, waived, discharged or
terminated except by a writing signed by the party against whom enforcement of
such change, waiver, discharge or termination is sought. This Agreement may be
signed in any number of counterparts each of which shall be deemed an original,
which taken together shall constitute one and the same instrument.
Section 16. No Petition. During the term of this Agreement and
for one year and one day after the termination hereof, none of the parties
hereto or any affiliate thereof will file any involuntary petition or otherwise
institute any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law against TWHI, TWHII, TRIFI and TRIFII or the Issuer.
[REST OF PAGE INTENTIONALLY LEFT BLANK]
16
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to the undersigned a counterpart hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Trendwest Entities and the Initial Purchaser.
Very truly yours,
TRI FUNDING III, INC.
By: _________________________________
Name:
Title:
TRENDWEST RESORTS, INC.
By: _________________________________
Name:
Title:
TW HOLDINGS, INC.
By: _________________________________
Name:
Title:
TW HOLDINGS II, INC.
By: _________________________________
Name:
Title:
TRI FUNDING II, INC.
By: _________________________________
Name:
Title:
TRI FUNDING COMPANY I, L.L.C.
By: TRENDWEST FUNDING I, INC.
By: ___________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
PRUDENTIAL SECURITIES INCORPORATED
By: _______________________________
Name: Andrew Yuder
Title:
17
<PAGE>
Exhibit A
Class Purchase Price (%)
A-1 99.375000%
A-2 99.375000%
A-3 99.375000%
B 97.922975%
C 98.778720%
D 99.375000%
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,254
<SECURITIES> 0
<RECEIVABLES> 95,750
<ALLOWANCES> 16,126
<INVENTORY> 41,215
<CURRENT-ASSETS> 0
<PP&E> 23,133
<DEPRECIATION> 2,737
<TOTAL-ASSETS> 201,035
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,279
<OTHER-SE> 105,932
<TOTAL-LIABILITY-AND-EQUITY> 201,035
<SALES> 175,393
<TOTAL-REVENUES> 205,193
<CGS> 52,179
<TOTAL-COSTS> 53,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,234
<INTEREST-EXPENSE> 125
<INCOME-PRETAX> 43,514
<INCOME-TAX> 16,996
<INCOME-CONTINUING> 26,518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,518
<EPS-BASIC> 1.55
<EPS-DILUTED> 1.54
</TABLE>
