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 June 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 August 5, 1999: 17,129,026 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1999 1998
----------------- ----------------
(Unaudited)
<S> <C> <C>
Assets:
Cash $ 9 9
Restricted cash 3,153 2,351
Notes Receivable, net of allowance for doubtful accounts, sales
returns and deferred gross profit 94,328 93,361
Accrued interest and other receivables 12,420 11,399
Residual interest in Notes Receivable sold 28,457 23,683
Receivable from Parent 891 --
Inventories 44,057 42,309
Property and equipment, net 20,311 20,343
Deferred income taxes 464 702
Other assets 3,010 4,341
----------------- ----------------
Total assets $ 207,100 198,498
================= ================
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable 5,669 1,436
Accrued liabilities 9,108 6,645
Accrued construction in progress 619 1,064
Borrowing under bank line of credit 20,000 30,000
Due to Parent -- 5,688
Allowance for recourse liability and deferred gross profit on Notes
Receivable sold 11,847 11,250
Income taxes payable 1,471 1,153
----------------- ----------------
Total liabilities 48,714 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 17,129,026 and 17,158,766 shares at June 30,
1999 and December 31, 1998, respectively 61,318 61,848
Retained earnings 97,068 79,414
----------------- ----------------
Total shareholders' equity 158,386 141,262
Commitments and contingencies
Total liabilities and shareholders' equity $ 207,100 198,498
================= ================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
TRENDWEST RESORTS, INC
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------------------- ----------------------------------
1999 1998 1999 1998
---------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenues:
Vacation Credit and Fractional Interest sales,
net $ 63,426 41,988 112,442 76,873
Finance income 3,338 3,101 7,289 6,300
Gains on sales of Notes Receivable 4,793 1,537 9,143 5,135
Resort management services 953 367 1,775 995
Other 785 1,000 2,550 1,519
---------------- ----------------- --------------- ----------------
Total revenues 73,295 47,993 133,199 90,822
---------------- ----------------- --------------- ----------------
Costs and operating expenses:
Vacation Credit and Fractional Interest cost of
sales 20,482 11,169 34,103 20,682
Resort management services 421 322 818 599
Sales and marketing 26,664 21,022 50,162 38,658
General and administrative 5,853 4,281 11,245 8,069
Provision for doubtful accounts and recourse
liability 4,377 2,919 7,820 5,315
Interest 53 2 109 38
---------------- ----------------- --------------- ----------------
Total costs and operating expenses 57,850 39,715 104,257 73,361
---------------- ----------------- --------------- ----------------
Income before income taxes 15,445 8,278 28,942 17,461
Income tax expense 5,935 3,114 11,288 6,433
---------------- ----------------- --------------- ----------------
Net income $ 9,510 5,164 17,654 11,028
================ ================= =============== ================
Basic net income per common share $ .55 .29 1.03 .63
Diluted net income per common share $ .55 .29 1.03 .63
Weighted average shares of common stock and
dilutive potential common stock outstanding:
Basic 17,140,051 17,593,366 17,149,358 17,593,366
Diluted 17,186,588 17,593,366 17,185,054 17,593,366
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------------------
1999 1998
------------------- --------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 17,654 11,028
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 750 474
Gain on sale of property and equipment (886) --
Amortization of residual interest in Notes Receivable sold 4,670 3,108
Provision for doubtful accounts, sales returns and recourse
liability 10,744 7,061
Recoveries of Notes Receivable charged off 134 98
Residual interest in Notes Receivables sold (9,473) (6,160)
Unrealized loss (gain) on residual interest in Notes Receivable
sold 874 (399)
Change in deferred gross profit (10) (510)
Deferred income tax expense (benefit) 238 (166)
Issuance of Notes Receivable (95,810) (67,104)
Proceeds from sale of Notes Receivable 66,022 55,643
Proceeds from repayment of Notes Receivable 21,975 13,924
Purchase of Notes Receivable (4,270) (7,477)
Changes in certain assets and liabilities:
Restricted cash (802) (339)
Inventories (1,748) 681
Accounts payable and accrued liabilities 2,594 (3,824)
Income taxes payable to Parent -- (2,755)
Income taxes payable 318 (429)
Other 244 202
------------------- --------------------
Net cash provided by operating activities 13,218 3,056
------------------- --------------------
Cash flows from investing activities:
Purchase of property and equipment (4,178) (3,818)
Proceeds from sale of property and equipment 4,412 --
------------------- --------------------
Net cash provided by (used in) investing activities 234 (3,818)
------------------- --------------------
Cash flows from financing activities:
Net (repayment) borrowings under bank line of credit and other (6,343) 4,000
Increase in Receivable from Parent (891) (123)
Decrease in Due to Parent (5,688) (1,947)
Repurchase of common stock (530) --
------------------- --------------------
Net cash (used in) provided by financing activities (13,452) 1,930
------------------- --------------------
Net increase (decrease) in cash -- 1,168
Cash at beginning of period 9 70
------------------- --------------------
Cash at end of period $ 9 1,238
=================== ====================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six month ended June 30,
-----------------------------------------------
1999 1998
-------------------- ----------------------
<S> <C> <C>
Supplemental disclosures of cash flow information cash paid during the period
for:
Interest (excluding capitalized amounts of $715 and $238,
respectively) $ 146 27
Income taxes 10,732 9,783
</TABLE>
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 six
months ended June 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 - Financing Transactions
On April 15, 1999, the Company created a wholly-owned, special purpose finance
company, TW Holdings II, Inc. 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. The Company
expects to be able to transfer the TW Holdings receivables to a new
special-purpose entity in conjunction with a private placement of Notes
Receivable in August of 1999 and retire the credit facility.
<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 Six months ended
June 30, June 30,
---------------------------------- ------------------------------------
1999 1998 1999 1998
---------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Basic
Weighted average shares outstanding 17,140,051 17,593,366 17,149,358 17,593,366
Diluted
Effect of dilutive securities 46,537 -- 35,696 --
---------------- --------------- -------------- ---------------
Diluted weighted average shares outstanding 17,186,588 17,593,366 17,185,054 17,593,366
================ ============== =============== ===============
</TABLE>
Net income available to common shareholders for basic net income per share was
$9,510 and $5,164 for the three months ended June 30, 1999 and 1998, and $17,654
and $11,028 for the six months ended June 30, 1999 and 1998, respectively.
At June 30, 1999 and 1998, there were options to purchase 481,540 and 492,000
shares of common stock, outstanding, 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>
June 30, December 31,
1999 1998
----------------- ------------------
<S> <C> <C>
Vacation Credits $ 3,467 11,342
Fractional Interests 2,998 --
Construction in progress 37,592 30,967
----------------- ------------------
Total inventories $ 44,057 42,309
================= ==================
</TABLE>
<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 six months ended June 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 10,744 15,435
Notes receivable charged-off and sales returns net of
Vacation Credits recovered (6,795) (9,919)
Recoveries 134 179
----------------- ------------------
Balances at end of period $ 25,018 20,935
================= ==================
Allowance for doubtful accounts and sales returns $ 15,771 12,363
Recourse liability on notes receivable sold 9,247 8,572
----------------- ------------------
$ 25,018 20,935
================= ==================
</TABLE>
Total notes receivable outstanding, including notes receivable sold,
amounted to $348,283 and $307,740 at June 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 June 30, 1999 the Company had
outstanding purchase commitments of $47.7 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 or Trendwest Funding II. 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.
<PAGE>
The following tables summarize the segment activity of the Company:
<TABLE>
<CAPTION>
Segment
Three months ended June 30, 1999: Sales Finance Other Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
External revenue $ 63,426 753 953 65,132
Interest revenue - net -- 991 -- 991
Interest revenue-intersegment -- 861 -- 861
Intersegment revenue -- 636 -- 636
----------- ----------- ----------- -------------
Segment revenue $ 63,426 3,241 953 67,620
Segment profit $ 10,793 2,078 532 13,403
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 6,022 -- -- 6,022
Segment
Three months ended June 30, 1998: Sales Finance Other Total
----------- ----------- ----------- -------------
External revenue $ 41,998 994 367 43,359
Interest revenue - net -- 769 -- 769
Interest revenue-intersegment -- 739 -- 739
Intersegment revenue -- 65 -- 65
----------- ----------- ----------- -------------
Segment revenue $ 41,998 2,567 367 44,932
Segment profit $ 6,279 1,741 45 8,065
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 3,895 -- -- 3,895
Segment
Six months ended June 30, 1999: Sales Finance Other Total
----------- ----------- ----------- -------------
External revenue $ 112,442 2,476 1,775 116,693
Interest revenue - net -- 2,190 -- 2,190
Interest revenue-intersegment -- 1,587 -- 1,587
Intersegment revenue -- 1,065 -- 1,065
----------- ----------- ----------- -------------
Segment revenue $ 112,442 7,318 1,775 121,535
Segment profit $ 18,276 5,180 957 24,413
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 10,744 -- -- 10,744
Gain on sale of property and equipment $ -- 886 -- 886
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Segment
Six months ended June 30, 1998: Sales Finance Other Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
External revenue $ 76,873 1,478 995 79,346
Interest revenue - net -- 1,803 -- 1,803
Interest revenue-intersegment -- 1,298 -- 1,298
Intersegment revenue -- 539 -- 539
----------- ----------- ----------- -------------
Segment revenue $ 76,873 5,118 995 82,986
Segment profit $ 11,203 3,514 396 15,113
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability $ 7,061 -- -- 7,061
</TABLE>
The following table provides a reconciliation of segment revenues and profits to
the consolidated amounts:
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Segment revenue $ 67,620 44,932 121,535 82,986
Interest expense reported net of interest
income 53 2 109 38
Elimination of intersegment revenue (1,497) (804) (2,652) (1,837)
Finance subsidiaries revenue 7,119 3,863 14,207 9,635
----------- ----------- ------------ -------------
Consolidated revenue $ 73,295 47,993 133,199 90,822
=========== =========== ============ =============
Segment profit $ 13,403 8,065 24,413 15,113
Corporate overhead not included in segment
reporting (3,558) (2,838) (6,989) (5,417)
Finance subsidiaries profit 5,600 3,051 11,518 7,765
----------- ----------- ------------ -------------
Consolidated pre-tax income $ 15,445 8,278 28,942 17,461
=========== =========== ============ =============
</TABLE>
All of the Company's revenue from external customers is derived from sales
within the United States.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 1999 to the three months ended
June 30, 1998
The Company achieved total revenues of $73.3 million for the three months ended
June 30, 1999, compared to $48.0 million for the three months ended June 30,
1998, an increase of 52.7%. The principal reasons for the overall improvement
were a 33.8% increase in Vacation Credit sales to $56.2 million for the three
months ended June 30, 1999, from $42.0 million for the three months ended June
30, 1998, and sales of Fractional Interests of $7.2 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 31.6% increase in the number of Vacation Credits sold to 42.9
million during the three months ended June 30, 1999, from 32.6 million during
the three months ended June 30, 1998. This increase was the result of the
continued maturation of sales
<PAGE>
offices opened in 1998 and increased Upgrade sales. Revenues from Upgrade sales
increased 21.9% to $7.8 million for the three months ended June 30, 1999, from
$6.4 million for the three months ended June 30, 1998, due primarily to an
increase of 26.1% in the number of Vacation Credits sold as Upgrades during the
three months ended June 30, 1999, compared to the three months ended June 30,
1998. The average price per Vacation Credit sold increased to $1.31 per credit
for the three months ended June 30, 1999, versus $1.26 per credit for the three
months ended June 30, 1998, and reflected an approximate 4% increase in the
selling price of Vacation Credits, effective June 29, 1998. The Company
instituted another increase the selling prices of Vacation Credits on June 28,
1999, of approximately 4%.
Finance income increased 6.5% to $3.3 million for the three months ended June
30, 1999, from $3.1 million for the three months ended June 30, 1998. The
increase in finance income is less than the percentage increase in carrying
balances of Notes Receivable for the two periods compared because of an
unfavorable mark-to-market adjustment on the residual interest in Notes
Receivable sold resulting from early payoffs and rising short-term LIBOR
interest rates occurring late in the second quarter of 1999. Gains on sales of
Notes Receivable increased 220.0% to $4.8 million for the three months ended
June 30, 1999, from $1.5 million for the three months ended June 30, 1998, due
to an increase in the principal balances of Notes Receivable sold of 129.9% to
$33.1 million from $14.4 million for the three months ended June 30, 1999 and
1998, respectively. In addition, the increase is due to a reduction in the
required yield to the Bank Group of 12.5 basis points, effective June 18, 1998,
and the new Receivables Warehouse Facility through Prudential Securities Credit
Corporation. The new facility has a required yield of 100 basis points over
LIBOR.
Vacation Credit and Fractional Interest cost of sales increased to $20.5 million
for the three months ended June 30, 1999, from $11.2 million for the three
months ended June 30, 1998, an increase of 83.0%, 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 product cost 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 32.3% from 26.7% of Vacation Credit
and Fractional Interest sales for each of the three months ended June 30, 1999
and 1998, respectively.
Sales and marketing costs increased 27.1% to $26.7 million for the three months
ended June 30, 1999, from $21.0 million for the three months ended June 30,
1998. As a percentage of Vacation Credit and Fractional Interest sales, sales
and marketing costs decreased to 42.1% for the three months ended June 30, 1999,
from 50.0% for the three months ended June 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, 1998, and the changes to
the commissions program effective June 30, 1998.
General and administrative expenses increased 37.2% to $5.9 million for the
three months ended June 30, 1999, from $4.3 million for the three months ended
June 30, 1998. As a percentage of total revenue, general and administrative
costs decreased to 8.0% for the three months ended June 30, 1999, from 9.0% for
the three months ended June 30, 1998. Absent the increase in gains on sales of
Notes Receivable and Fractional Interest sales, general and administrative
expenses, as a percentage of total revenue, would have been comparable to the
prior period.
Provision for doubtful accounts and recourse liability increased 51.7% to $4.4
million for the three months ended June 30, 1999, from $2.9 million for the
three months ended June 30, 1998. As a percentage of Vacation Credit and
Fractional sales, the provision remained comparable at 6.9% for the two periods
compared.
Comparison of the six months ended June 30, 1999 to the six months ended
June 30, 1998
The Company achieved total revenues of $133.2 million for the six months ended
June 30, 1999, compared to $90.8 million for the six months ended June 30, 1998,
an increase of 46.7%. The principal reasons for the overall improvement were a
36.8% increase in Vacation Credit sales to $105.2 million for the six months
ended June 30, 1999, from $76.9 million for the six months ended June 30, 1998,
and sales of Fractional Interests of $7.2 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
<PAGE>
from the pre-sales at that time. This increase was primarily the result of a
34.0% increase in the number of Vacation Credits sold to 80.0 million during the
six months ended June 30, 1999, from 59.7 million during the six months ended
June 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 19.0% to $15.0 million for the six months ended June 30, 1999 from
$12.6 million for the six months ended June 30, 1998, due primarily to an
increase of 19.8% in the number of Vacation Credits sold as Upgrades during the
six months ended June 30, 1999, compared to the six months ended June 30, 1998.
The average price per Vacation Credit sold increased to $1.31 per credit for the
six months ended June 30, 1999, versus $1.26 per credit for the six months ended
June 30, 1998, and reflected an approximate 4% increase in the selling price of
Vacation Credits, effective June 29, 1998. The Company instituted another
increase the selling prices of Vacation Credits on June 28, 1999, of
approximately 4%.
Finance income increased 15.9% to $7.3 million for the six months ended June 30,
1999, compared to $6.3 million for the six months ended June 30, 1998. The
increase in finance income reflects the increase in carrying balances of Notes
Receivable for the two periods compared and the 1999 impact of an unfavorable
mark-to-market adjustment on the residual interest in Notes Receivable sold
resulting from early payoffs and rising interest rates. Gains on sales of Notes
Receivable increased 78.4% to $9.1 million for the six months ended June 30,
1999, from $5.1 million for the six months ended June 30, 1998. This increase is
due to a reduction in the required yield to the Bank Group of 12.5 basis points,
effective June 18, 1998, and the new Receivables Warehouse Facility through
Prudential Securities Credit Corporation. The new facility has a required yield
of 100 basis points over LIBOR.
Other income increased $1.1 million to $2.6 million for the six months ended
June 30, 1999, compared to $1.5 million for the six months ended June 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 $34.1 million
for the six months ended June 30, 1999, from $20.7 million for the six months
ended June 30, 1998, an increase of 64.7%, primarily reflecting the increase in
sales of Vacation Credits and Fractional Interest sales. As a percentage of
Vacation Credit and Fractional Interest sales, cost of sales were 30.3% for the
six months ended June 30, 1999, from 26.9% of Vacation Credit sales for the six
months ended June 30, 1998. This increase is the result of the Fractional
Interests having a higher product cost than Vacation Credits which is offset by
lower sales and marketing costs.
Sales and marketing costs increased 29.7% to $50.2 million for the six months
ended June 30, 1999, from $38.7 million for the six months ended June 30, 1998.
As a percentage of Vacation Credit and Fractional Interest sales, sales and
marketing costs decreased to 44.6% for the six months ended June 30, 1999, from
50.3% for the six months ended June 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, 1998, and the changes to the commissions program
effective June 30, 1998.
General and administrative expenses increased 38.3% to $11.2 million for the six
months ended June 30, 1999, from $8.1 million for the six months ended June 30,
1998. As a percentage of total revenue, general and administrative costs
decreased to 8.4% of total revenue for the six months ended June 30, 1999 from
8.9% of total revenue for the six months ended June 30, 1998. Absent the
increase in gains on sales of Notes Receivable and Fractional Interest sales,
general and administrative expenses, as a percentage of total revenue, would
have been slightly higher for the six month ended June 30, 1999, when compared
to the same period last year.
Provision for doubtful accounts and recourse liability increased 47.2% to $7.8
million for the six months ended June 30, 1999, from $5.3 million for the six
months ended June 30, 1998. As a percentage of Vacation Credit sales, the
provision remained comparable at 6.9% for each of the six months ended June 30.
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 June 30, 1999, and December 31, 1998,
were $25.0 million, and $20.9
<PAGE>
million, respectively, representing approximately 7.2% 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 Note Receivable
origination. The Company uses this historical analysis, in conjunction with
other factors such as local economic conditions and industry trends. The Company
also utilizes experience factors of more mature sales sites in establishing the
reserve for bad debts at new sales offices. The Company generally charges off
all receivables when they become 180 days past due and returns the credits
associated with such charge-offs to inventory. At June 30, 1999, and December
31, 1998, 1.84% and 1.97% of the Company's total receivables portfolio of $348.3
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 six months ended June 30, 1999 and 1998, cash provided by operating
activities was $13.2 million and $3.1 million, respectively. Cash generated from
operating activities increased principally due to the increased sales of Notes
Receivable. For the first six months of 1999, cash used in operating activities
was principally for the issuance and purchase of Notes Receivable of $100.1
million to finance the purchase of Vacation Credits by Owners and Fractional
Interests and an increase in inventory of $1.7 million due to additional
construction in progress to meet increasing sales demand. Cash provided by
operating activities resulted primarily from sales and repayments of Notes
Receivable of $88.0 million and net income of $17.7 million. For the six months
ended June 30, 1998, cash used in operating activities was principally for the
issuance and purchase of Notes Receivable of $74.6 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 $69.5
million and net income of $11.0 million.
Net cash provided by (used in) investing activities for the six months ended
June 30, 1999 and 1998, was $.2 million and ($3.8) 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 six months ended June 30, 1999, of $4.2 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 $3.8
million was for 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 six months ended
June 30, 1999 and 1998, was ($13.5) million and $1.9 million, respectively. For
the six months ended June 30, 1999, cash used in financing activities was
principally the result of payments on the Bank line of credit and other of $6.3
million and a decrease in Due to the Parent on the revolving line of credit of
$5.7 million. Cash provided by financing activities for the six months ended
June 30, 1998, was principally the result of borrowings on the Bank line of
credit of $4.0 million. Cash used in financing activities for the same period
was the result of a decrease in Due to Parent of $1.9 million.
Financing of Notes Receivable has 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 Company expects to be able to transfer the TW Holdings
receivables to a new special-purpose entity in conjunction with a private
placement of Notes Receivable in August of 1999 and retire the credit facility.
<PAGE>
The Company has a $10 million open line of credit with the Parent which bears
interest at prime plus 1% (currently 8.75%) per annum. The line of credit is
payable on demand. As of June 30, 1999, there was no outstanding indebtedness to
the Parent. The Company may advance excess funds to the Parent at prime minus 2%
(currently 5.75%) per annum. At June 30, 1999, there was a $0.9 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 $20.0 million
at June 30, 1999.
For the remainder of 1999, the Company anticipates spending approximately $28.9
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 and borrowings under the revolving credit
agreement. Acquisition of new resort sites and properties is an ongoing process
and availability of certain properties in desired locations could result in
increased expenditures for such activities. The Company believes that, with
respect to its current operations, cash generated from operations and future
borrowings available under existing agreements, will be sufficient to meet the
Company's working capital and capital expenditure needs through the end of 1999.
WorldMark maintains a replacement reserve for the WorldMark Resorts which is
funded from the annual assessments of the Owners. At June 30, 1999, the amount
of such reserve was approximately $10.0 million. The replacement reserve is
utilized to refurbish and replace the interiors and furnishings of the
condominium units and to maintain the exteriors and common areas in WorldMark
Resorts in which all units are owned by WorldMark. The Company may advance funds
to WorldMark from time to time.
Since completed units at various resort properties are acquired or developed in
advance and a significant portion of the purchase price of Vacation Credits is
financed by the Company, the Company continually needs funds to acquire and
develop property, to carry Notes Receivable contracts and to provide working
capital. The Company has historically secured additional funds through its
revolving credit facility, 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
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.
The Company has completed a review of each line of code for its Reservations,
Contract Processing, and Collections applications. These applications have been
analyzed and tested and the Company has determined that all these applications
are Year 2000 compliant. These critical applications are currently operating in
the live environment.
The Marketing system is another critical application which is currently being
rewritten, upgraded and analyzed for Year 2000 compliance. The upgrades and Year
2000 compliance on the Marketing system is expected to be completed and tested
by the end of the third quarter.
The Company is also monitoring the Year 2000 compliance program of Sage Systems,
Inc. (Sage), the servicer of the Company's Notes Receivable portfolio. Sage has
represented that 28 programs are being remediated for Year 2000 compliance. The
Company will play an active role in reviewing the remediated lines of code and
will also participate in the testing of Sage applications.
<PAGE>
The Company has incurred approximately $.7 million to date to modify or replace
software in order to remediate the Year 2000 issue and anticipates future
expenditures of approximately $.3 million. In the worst case, if the remediation
is not completed in time, management will employ additional personnel and use PC
based applications to maintain critical functions.
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 is developing a contingency
plan to address the possibility of Sage being unable to adequately address Year
2000 issues.
<PAGE>
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
foreign currency exchange rate risk nor commodity price risk. There have been no
material changes to the Company's exposure to market risk since December 31,
1998.
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
Trendwest Resorts, Inc. (Company) held its Annual Meeting of
Shareholders on June 3, 1999. The matters voted upon at the meeting and
the votes cast with respect thereto were as follows:
1. Election of Directors:
Nominee: Number of shares Number of shares
voted FOR Withheld
---------------------------------- -------------------- -------------------
---------------------------------- -------------------- -------------------
Jerol E. Andres 17,017,909 2,040
Roderick C. Wendt 17,017,909 2,040
Linda M. Tubbs 17,017,909 2,040
2. Proposal to approve the 1999 Trendwest Employee Stock Purchase Plan:
Number of shares Number of shares Number of shares
voted FOR voted AGAINST Withheld
--------------------- -------------------- --------------------
--------------------- -------------------- --------------------
17,019,149 300 500
3. Proposal to Ratify the selection of KPMG LLP as independent auditors
of the Company for the 1999 fiscal year:
Number of shares Number of shares Number of shares
voted FOR voted AGAINST Withheld
--------------------- -------------------- --------------------
--------------------- -------------------- --------------------
17,019,149 300 500
<PAGE>
Item 5 - Other Information
On June 18, 1999, the Company and JELD-WEN, inc., its largest
shareholder, announced that JELD-WEN has retained Banc of
America Securities LLC as financial advisor to explore
strategic and financial alternatives relating to JELD-WEN's
ownership interest in Trendwest Resorts, Inc.. JELD-WEN
currently holds approximately 13.7 million shares, or 80% of
the Company's outstanding common stock.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Restated Articles of Incorporation (1)
2.2 Restated Bylaws (1)
11 Statement re: Computation of Earnings per share - See note 4
of "Notes to Condensed Consolidated Financial Statements".
10.41 Receivable Sale Agreement between Registrant and TW Holdings II
Dated as of April 15, 1999.
10.42 Credit Agreement between Registrant, TW Holdings II as
Borrower and Prudential Securities
Credit Corporation as lender dated as of April 15, 1999.
10.43 Trust Indenture between Registrant, TW Holdings II, Sages
Systems, Inc., and LaSalle National Bank Dated as of April 15,
1999.
27 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 333-26861).
(a) Reports on Form 8-K
None
<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: August 10, 1999 /s/ WILLIAM F. PEARE
------------------ ------------------------------------------
William F. Peare
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: August 10, 1999 /s/ GARY A. FLORENCE
------------------ ------------------------------------------
Gary A. Florence
Vice President, Chief Financial Officer
and Treasurer
(Principal Financial Officer)
RECEIVABLE SALE AGREEMENT
between
TRENDWEST RESORTS, INC.,
as Seller
and
TW HOLDINGS II, INC.,
as Purchaser
Dated as of April 15, 1999
<PAGE>
RECEIVABLE SALE AGREEMENT (the "Agreement"), dated as of April 15,
1999, by and between Trendwest Resorts, Inc., an Oregon corporation (the
"Seller"), and its successors and permitted assigns and TW Holdings II, Inc., a
Delaware corporation (the "Purchaser"), and its successors and assigns.
W I T N E S S E T H:
WHEREAS, the Purchaser has been formed as a qualifying special purpose
entity for the purpose of acquiring Receivables from the Seller; and
WHEREAS, from time to time, the Seller intends to sell or contribute
Receivables to the Purchaser, and the Purchaser intends to purchase and/or
accept Receivables from the Seller.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto covenant and agree as follows:
SECTION 1. Definitions; Interpretation. Capitalized terms used but not
defined herein shall have the meanings given them "Trendwest Warehouse Facility
Definitions" attached hereto as Annex A.
SECTION 2. Sale and Disposition of Receivables.
(a) From time to time, the Seller may sell or contribute (and
by execution of a Sale Assignment will thereby sell or contribute) to the
Purchaser, subject to the terms and conditions of this Agreement, all right,
title and interest of the Seller in and to:
(i) the Receivables listed in the related Sale
Assignment, all payments paid in respect thereof and all monies due, to
become due or paid in respect thereof after the related Cut-off Date
and all liquidation proceeds and recoveries thereon, in each case as
they arise after the related Cut-off Date or other date specified in
the Sale Assignment;
(ii) all security interests and liens and property subject
thereto from time to time purporting to secure payment by Obligors
under such Receivables;
(iii) all guaranties, indemnities and warranties, and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivables;
(iv) all collections and records (including computer records)
with respect to the
foregoing;
(v) all documents relating to such Receivables, including
those contained in the Receivable Files and all Receivable Documents;
and
(vi) all income, payments, proceeds and other benefits of any
and all of the foregoing.
Subject to the terms and conditions of this Agreement, the Purchaser agrees to
purchase or accept the foregoing from the Seller. To the extent that the
Receivable Acquisition Price paid to the Seller for any Receivables is less than
the fair market value of such Receivables, the difference between such fair
market value and the Receivable Acquisition Price shall be deemed to be a
capital contribution made by the Seller to Purchaser on the relevant Sale Date.
(b) In order to offer a Receivable for sale by the Seller to the
Purchaser, the Seller shall deliver to the Custodian, on behalf of the
Purchaser, each of the Receivable Documents and the originally executed Sale
Assignment therefor five Business Days prior to the Sale Date. Upon receipt by
the Custodian of the complete Receivable Documents and the duly executed
original Sale Assignment, the acceptance and approval by the Lender of a duly
executed Receipt from the Custodian, and subject to the terms of this Agreement,
the Purchaser will transfer or cause to be transferred to the Seller, an amount
equal to the Receivable Acquisition Price with respect to such the Receivables
identified on the Receipt by the close of business on or before the second
Business Day following the receipt by the Custodian of such Receivable Documents
and Sale Assignment.
(c) Upon payment of the Receivable Acquisition Price and execution of
the Sale Assignment with respect to a Receivable, the ownership of each such
Receivable and all collections allocable to principal thereon since the related
Cut-off Date and all other property interests or rights conveyed pursuant to and
referenced in Section 2(a) hereof, shall be vested in the Purchaser, and the
Seller shall not take any action inconsistent with such ownership nor claim any
ownership interest in any such Receivable for any purpose whatsoever other than
consolidated financial and federal and state income tax reporting.
(d) On or prior to the related Sale Date, the Seller shall indicate in
its computer files and other records that each Receivable has been sold to the
Purchaser and transferred and, if applicable, pledged to the Trustee on behalf
of the Lender. In addition, on or prior to the Sale Date, the Seller shall
deliver to the Purchaser (or, if the Purchaser has pledged such Receivables to
the Trustee, to the Lender), UCC-1 financing statements in favor of the
Purchaser and, if applicable, the Trustee on behalf of the Lender with respect
to the Receivables meeting the requirements of applicable state law in such
manner and in such jurisdictions as are necessary or appropriate to perfect the
acquisition of the Receivables by the Purchaser from the Seller. In addition,
the Seller and the Purchaser each shall respond to any inquiries with respect to
ownership of a Receivable by stating that such Receivable has been sold to the
Purchaser and that the Purchaser is the owner of such Receivable and, if
applicable, that such Receivable has been assigned to the Trustee on behalf of
the Lender.
(e) The Seller, at any time and from time to time shall, at its sole
cost and expense, afford the Purchaser, the Trustee and the Custodian, as the
case may be, and their respective authorized agents and representatives upon
reasonable notice, reasonable access during regular business hours to its
records relating to its performance under and compliance with this Agreement and
will cause its personnel to assist in any examination of such records to enable
such party to determine the Seller's compliance with the terms of this
Agreement. The examination referred to in the immediately preceding sentence
will be conducted in a manner that does not unreasonably interfere with the
Seller's normal operations or customer or employee relations.
(f) The Seller agrees that, from time to time, at its expense, it will
promptly execute and deliver all further instruments, notices and documents, and
take all further action, that may be necessary or appropriate, as reasonably
determined by the Purchaser, or that the Purchaser may reasonably request, in
order to perfect, protect or more fully evidence the transfer of ownership of
the Receivables to the Purchaser or to enable the Purchaser or the Trustee on
behalf of the Lender to exercise or enforce any of its respective rights
hereunder or under any Sale Assignment, as the case may, be or to otherwise
facilitate any Securitization Take-out.
(g) Any action required or permitted to be taken by the Purchaser in
furtherance of its agreement to purchase Receivables hereunder, including
enforcement of its rights and receipt of documents, may be delegated by it to
one or more agents, or assigned to the Lender pursuant to the Credit Agreement.
(h) Seller acknowledges that the Purchaser has been formed with the
intent that the Receivables will, from time to time, be pooled and disposed of
by the Purchaser in a Securitization Take-out.
(i) Except as specifically provided for herein, the sale and the
purchase of the Receivables under this Agreement is without recourse to the
Seller; provided that the Seller shall be liable to the Purchaser for all
representations, warranties, covenants and indemnities made by it under this
Agreement.
(j) Neither the Purchaser nor any assignee shall have any obligation or
liability with respect to any Receivable, nor shall the Purchaser or any
assignee have any liability to any Obligor in respect of any Receivable. No such
obligation or liability is intended to be assumed by the Purchaser or any
assignee herewith, and any such liability hereby is expressly disclaimed.
SECTION 3. Intended Characterization; Grant of Security Interest.
It is the intention of the parties hereto that each transfer of
Receivables to be made pursuant to the terms hereof shall constitute a sale or,
to the extent set forth in Section 2(a) hereof, a capital contribution by the
Seller to the Purchaser and not a loan. In the event, however, that a court of
competent jurisdiction were to hold that any such transfer constitutes a loan
and not a sale or capital contribution, it is the intention of the parties
hereto that the Seller shall be deemed to have granted to the Purchaser as of
the date hereof a first priority perfected security interest in all of Seller's
right, title and interest in, to and under each Receivable, and the related
property as described in Section 2(a) hereof. In the event of the
characterization of any such transfer as a loan, the amount of interest payable
or paid with respect to such loan under the terms of this Agreement shall be
limited to an amount which shall not exceed the maximum nonusurious rate of
interest allowed by the applicable state law or any applicable law of the United
States permitting a higher maximum nonusurious rate that preempts such
applicable state law, which could lawfully be contracted for, charged or
received (the "Highest Lawful Rate"). In the event any payment of interest on
any such loan exceeds the Highest Lawful Rate, the parties hereto stipulate that
(a) to the extent possible given the term of such loan, such excess amount
previously paid or to be paid with respect to such loan be applied to reduce the
principal balance of such loan, and the provisions thereof immediately be deemed
reformed and the amounts thereafter collectible thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for thereunder and (b) to the extent that the reduction of the principal
balance of, and the amounts collectible under, such loan and the reformation of
the provisions thereof described in the immediately preceding clause (a) is not
possible given the term of such loan, such excess amount will be deemed to have
been paid with respect to such loan as a result of an error and upon discovery
of such error or upon notice thereof by any party hereto such amount shall be
refunded by the recipient thereof.
SECTION 4. Conditions Precedent to Purchase.
The agreement of the Purchaser to purchase Receivables pursuant to
Section 2 on the first Sale Date is subject to the fulfillment and satisfaction
of the conditions required in Section 3 and Section 4 of the Credit Agreement
and, on any Sale Date thereafter, the conditions required in Section 4 of the
Credit Agreement.
SECTION 5. Representations and Warranties of Seller.
(a) The Seller represents and warrants to the Purchaser, as of the date
hereof (which representations and warranties shall be deemed reaffirmed on each
Sale Date as though made on such Sale Date) with respect to the Seller as
follows:
(i) The Seller is a corporation, duly organized, validly
existing and in good standing under the laws of the State of Oregon, is
duly qualified to do business and is in good standing in every
jurisdiction in which the nature of its business requires it to be so
qualified;
(ii) The Seller has the power and authority to own and convey
all of its properties and assets and to execute and deliver this
Agreement and to perform the transactions contemplated hereby;
(iii) the execution, delivery and performance by the Seller
of this Agreement and the transactions contemplated hereby, (A) have
been duly authorized by all necessary corporate or other action on the
part of the Seller, (B) do not contravene or cause the Seller to be in
default under (1) the Seller's organizational documents or operating
agreement, (2) any contractual restriction with respect to any debt of
the Seller or contained in any indenture, loan or credit agreement,
lease, mortgage, security agreement, bond, note, or other agreement or
instrument binding on or affecting the Seller or its property or (3)
any law, rule, regulation, order, writ, judgment, award, injunction or
decree applicable to, binding on or affecting the Seller or its
property and (C) do not result in or require the creation of any
Adverse Claim;
(iv) this Agreement has been duly executed and delivered on
behalf of the Seller;
(v) no consent of, or other action by, and no notice to or
filing with, any Governmental Authority or any other party, is required
for the due execution, delivery and performance by the Seller of this
Agreement or for the perfection of or the exercise by the Purchaser of
any of its rights or remedies hereunder, other than such consents as
have been obtained and complete copies of which have been provided to
the Purchaser except that the exercise of remedies hereunder may
require notices and other actions in accordance with applicable law at
the applicable time;
(vi) this Agreement is the legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance
with its terms;
(vii) there is no pending or to the Seller's best knowledge,
threatened action, suit or proceeding, against or affecting the Seller
or the property of the Seller, in any court or tribunal, or before any
arbitrator of any kind or before or by any Governmental Authority (A)
asserting the invalidity of this Agreement, (B) seeking to prevent the
sale and assignment by the Seller of any Receivable or the consummation
of any of the transactions contemplated hereby or (C) seeking any
determination or ruling that might materially and adversely affect (1)
the performance by the Seller of this Agreement or (2) the validity or
enforceability of this Agreement; and
(viii) the Seller confirms each of the representations and
warranties made by it pursuant to Section 2.2 of the Credit Agreement.
(b) With respect to each Receivable, the Seller represents and warrants
to the Purchaser, as of the Sale Date, that:
(i) such Receivable has not been sold, assigned or pledged by
the Seller to any other Person, and the Seller has conveyed to the
Purchaser all of the Seller's right, title and interest to such
Receivable, free and clear of any Adverse Claim;
(ii) this Agreement and each related Sale Assignment
constitutes a valid sale, transfer, assignment set-over and conveyance
to the Purchaser of all right, title and interest of the Seller in and
to such Receivable now existing and hereafter created;
(iii) the Sale Assignment has been duly executed and
delivered by the Seller;
(iv) each Receivable Document has been delivered to the
Custodian on behalf of Purchaser or any assignee of the Purchaser;
(v) Bulk Transfer Provisions. No transfer, assignment
or conveyance of the Receivables contemplated by this Agreement
will be subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(vi) Transfer Taxes. No transfer, assignment or conveyance of
the Receivable is subject to or will result in any tax, fee or
governmental charge payable by the Seller or the Purchaser to any
federal, state or local government ("Transfer Taxes"). In the event
that the Seller or the Purchaser receives actual notice of any Transfer
Taxes arising out of the transfer, assignment and conveyance of the
Receivable, on written demand by the Purchaser, or upon the Seller
otherwise being given notice thereof, the Seller shall pay, and
otherwise indemnify and hold the Purchaser, the Trustee and the
Noteholders harmless, on an after-tax basis, from and against any and
all such Transfer Taxes;
(vii) Legal Name. The legal name of the Seller is as set
forth in the signature page of this Agreement. The Seller has not
operated under any other names during the last six years. The Seller
does not have any other trade names, fictitious names, assumed names or
"doing business as" names;
(viii) Additional Representations and Warranties. The Seller
confirms the representations and warranties made by it pursuant to
Section 2.3 of the Credit Agreement; and
(xii) All Filings Made. Except as provided for in Section 2(d)
hereof, at the Sale Date, no further filings (including, without
limitation, UCC filings) or other actions are necessary in any
jurisdiction to give the Purchaser an ownership interest in the
Receivables.
(c) It is understood and agreed that the representations and warranties
set forth in this Section 5 shall survive the sale or contribution of a
Receivable to the Purchaser and any pledge of such Receivable by the Purchaser
to the Trustee on behalf of the Lender and shall continue so long as any such
Receivable shall remain outstanding until such time as such Receivable is
repurchased pursuant to Section 5(d). The Seller acknowledges that it has been
advised that the Purchaser may assign all or part of its right, title and
interest in and to each Receivable and its right to exercise the remedies
created by this Section 5 to the Trustee on behalf of the Lender. The Seller
agrees that, upon any such assignment, the Trustee and the Lender may enforce
directly, without joinder of the Purchaser (but subject to any defense that the
Seller may have under this Agreement), the purchase obligations of the Seller
set forth in Section 5(d) with respect to breaches of the representations and
warranties set forth in Section 5(a) and Section 5(b).
(d) Upon discovery by the Purchaser, the Trustee or the Lender, any
subsequent assignee or the Seller of a breach of any of the representations and
warranties in Section 5(a) or Section 5(b) which materially and adversely
affects the value of a Receivable or the interests of the Purchaser or a
subsequent assignee therein, the party discovering such breach or failure to
deliver shall give prompt written notice to the other parties. If, at the time
of such discovery, (i) no loss has yet occurred with respect to such Receivable,
(ii) such breach or failure to deliver is curable and (iii) Seller shall have
failed to cure such breach within 30 days after the earlier of (A) the Seller's
discovery of such breach and (B) the Seller's receipt of written notice of such
breach, then if requested in writing by notice from the Purchaser or any
subsequent assignee, the Seller shall immediately repurchase such Receivable by
remitting an amount equal to the Repurchase Price in the manner specified in
such notice. Any such repurchase shall be made without recourse against, or
warranty, express or implied, of the Purchaser or any such assignee.
Notwithstanding the immediately preceding sentence, in connection with any such
repurchase, the Purchaser shall in writing represent to the Seller (i) the
amount of the remaining balance of the relevant Receivable and (ii) that the
Purchaser has not violated in any material way any laws applicable to the
collectibility of such Receivable. The Purchaser or any subsequent assignee
shall execute and deliver an assignment substantially in the form of Exhibit B
attached hereto and made a part hereof to vest ownership of such Receivable in
the Seller. If, at the time of the discovery of such breach, a loss has occurred
with respect to such Receivable, then the Seller shall pay to the Purchaser or
any subsequent assignee an amount equal to the amount, if any, by which the
Repurchase Price exceeds the net proceeds from such Receivable. It is understood
and agreed that the obligation of the Seller to repurchase any Receivable
pursuant to this Section 5(d) or to make the payment described in the
immediately preceding sentence (the "Repurchase Requirement") shall constitute
the sole remedy for the breach of any representation or warranty set forth in
Section 5(b); provided, that the foregoing limitation shall not be construed to
limit in any manner the Purchaser's rights to (a) declare the Termination Date
to have occurred to the extent that such breaches also constitute, or contribute
to the determination of, an Event of Purchase Termination, or (b) offset the
amount of the Repurchase Price from the Receivable Acquisition Price in
connection with any other Receivables. It is also understood and agreed that
upon the repurchase by Seller of a Receivable in accordance with this Section
5(d) and the payment by Seller of all monies required to be paid by it under
this Section 5(d) it is the intention of the parties hereto and the Purchaser
warrants that, if the seller of such Receivable is the Purchaser, Seller shall
own all right, title and interest of the Purchaser in and to such Receivable.
(e) With respect to any representations and warranties contained in
Section 5(b) which are made to the best of the Seller's knowledge, if it is
discovered that any representation and warranty is inaccurate and such
inaccuracy materially and adversely affects the value of a Receivable or the
interests of the Purchaser or any assignee thereof, then notwithstanding the
Seller's lack of knowledge of the accuracy of such representation and warranty
at the time such representation or warranty was made, such inaccuracy shall be
deemed a breach of such representation or warranty for purposes of the
Repurchase Requirement described in Section 5(d).
(f) It is understood and agreed that the Repurchase Requirement shall
survive any assignment of a Receivable by the Purchaser to any subsequent
assignee and shall continue so long as any such Receivable shall remain
outstanding notwithstanding any termination of this Agreement.
SECTION 6. Additional Covenants of Seller. Seller shall, unless
the Purchaser shall otherwise consent in writing:
(a) comply in all material respects with all applicable laws,
rules, regulations and orders with respect to itself, its business and
properties; and
(b) preserve and maintain its corporate existence, rights,
franchises and privileges in the jurisdiction of its organization and,
if applicable, all necessary Sales Finance Company Licenses.
SECTION 7. Events of Purchase Termination. If any of the following
events (each, an "Event of Purchase Termination") shall occur and be continuing:
(a) the Seller shall fail to perform or observe any material
term, covenant or agreement contained in this Agreement and such
failure shall remain unremedied for 30 days after written notice
thereof shall have been given by the Purchaser to the Seller; or
(b) an Event of Default under the Credit Agreement or the
Indenture which default results in the acceleration of the Notes; or
(c) there is a material breach of any of the
representations and warranties of the Seller set forth in Section
5(a); or
(d) this Agreement and each Sale Assignment shall for any
reason cease to evidence the transfer to the Purchaser of the legal,
equitable and marketable title to, and ownership of, the Receivables;
or
(e) the Purchaser becomes obligated to cease
purchasing Receivables from the Seller in accordance with the
Credit Agreement;
then and in any such event, the Purchaser may, by notice to the Seller declare
an Event of Purchase Termination to have occurred, in which case the Termination
Date shall be the date such notice is given without demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Seller;
provided, that in the event that any of the Events of Purchase Termination
described in subsections (d) or (e) of this Section 7 shall have occurred, an
Event of Purchase Termination shall be deemed to have been declared in which
case the Termination Date shall be on the date on which such Event of Purchase
Termination shall have occurred, without demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Seller. Upon any such
actual declaration or deemed declaration, (i) all of the Seller's rights under
this Agreement (except its rights by virtue of the Purchaser not having
performed its obligations and agreements hereunder) shall terminate and (ii) the
Purchaser shall have, in addition to all other rights and remedies under this
Agreement, all other rights and remedies provided under the UCC and other
applicable law, which rights shall be cumulative.
SECTION 8. No Proceedings. The Seller hereby agrees that it will not,
directly or indirectly, institute, or cause to be instituted, or join any Person
in instituting, against the Purchaser any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any federal or state bankruptcy or similar law so long as there shall not have
elapsed one year plus one day since the latest maturing Notes issued by the
Purchaser.
SECTION 9. Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing and mailed or
telecommunicated, or delivered as to each party hereto, at its address set forth
under its name on the signature page hereof or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall not be effective until received by the
party to whom such notice or communication is addressed.
SECTION 10. No Waiver; Remedies. No failure on the part of the Seller,
the Purchaser or any assignee thereof to exercise, and no delay in exercising,
any right hereunder or under any Sale Assignment shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
other remedies provided by law.
SECTION 11. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Seller, the Purchaser and their
respective successors and permitted assigns. Any assignee shall be an express
third party beneficiary of this Agreement, entitled to directly enforce this
Agreement. The Seller may not assign any of its rights and obligations hereunder
or any interest herein without the prior written consent of the Purchaser and
any assignee. The Purchaser may, and intends to, assign all of its rights
hereunder and the Seller consents to any such assignment. This Agreement shall
create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until its
termination; provided, that the rights and remedies with respect to any breach
of any representation and warranty made by the Seller pursuant to Section 5 and
the Repurchase Requirement shall be continuing and shall survive any termination
of this Agreement.
SECTION 12. Amendments; Consents and Waivers. No modification,
amendment or waiver of, or with respect to, any provision of this Agreement, and
all other agreements, instruments and documents delivered thereto, nor consent
to any departure by the Seller from any of the terms or conditions thereof shall
be effective unless it shall be in writing and signed by each of the parties
hereto and the written consent of the Lender is given. The Purchaser shall
promptly provide the Trustee with such written modifications, amendments or
waivers. Any waiver or consent shall be effective only in the specific instance
and for the purpose for which given. No consent to or demand by the Seller in
any case shall, in itself, entitle it to any other consent or further notice or
demand in similar or other circumstances. The Seller acknowledges that in
connection with the intended assignment by the Purchaser of all of the Seller's
right, title and interest in and to each Receivable to the Trustee on behalf of
the Lender, the Purchaser intends to enter into certain financing and security
arrangements with the Lender, and the Lender, subject to the terms of such
arrangements, shall provide funds to the Purchaser to purchase Receivables
hereunder and pursuant to which the ability of the Purchaser to perform
hereunder (including its ability to purchase Receivables and to render consents
hereunder) shall be subject to the consent of the Lender. Notwithstanding the
above, the obligation of the Purchaser to perform hereunder shall not be
diminished by the existence of such arrangements.
SECTION 13. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation, shall not in any way be
affected or impaired thereby in any other jurisdiction. Without limiting the
generality of the foregoing, in the event that a Governmental Authority
determines that the Purchaser may not purchase or acquire Receivables, the
transactions evidenced hereby shall constitute a loan and not a purchase and
sale, notwithstanding the otherwise applicable intent of the parties hereto and
the Seller shall be deemed to have granted to the Purchaser as of the date of
each Sale a first priority perfected security interest in all of the Seller's
right, title and interest in, to and under the Receivables, and all proceeds
thereof.
SECTION 14. GOVERNING LAW; CONSENT TO JURISDICTION.
(A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES OF
CONFLICTS OF LAW.
(B) THE SELLER AND THE PURCHASER HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. THE SELLER AND THE PURCHASER EACH HEREBY WAIVES ANY OBJECTION
BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF THE SELLER OR THE PURCHASER TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY OF THEM TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 15. Headings. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
SECTION 16. Execution in Counterparts. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and both of which when taken together shall
constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Receivable
Sale Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
TRENDWEST RESORTS, INC.,
as Seller
By: _______________________
Name:
Title:
Address: 9805 Willows Road
Redmond, Washington 98052
Telephone: (425) 498-2500
Telecopier: (425) 498-3062
TW HOLDINGS II, INC.,
as Purchaser
By: ______________________
Name:
Title:
Address: 9805 Willows Road
Redmond, Washington 98052
Telephone: (425) 498-2500
Telecopier: (425) 498-3062
<PAGE>
ex-receivable sale agreement
EXHIBIT A
TO
RECEIVABLE SALE AGREEMENT
DATED AS OF APRIL 15, 1999
BY AND BETWEEN
TRENDWEST RESORTS, INC.
AND
TW HOLDINGS II, INC.
[FORM OF SALE ASSIGNMENT]
SALE ASSIGNMENT, dated as of [__], 199[_], between Trendwest
Resorts, Inc. (the "Seller") and TW Holdings II, Inc. (the "Purchaser").
1. We refer to the Receivable Sale Agreement (the "Sale
Agreement") dated as of April 15, 1999 between the Assignor and the Assignee.
All provisions of such Sale Agreement are incorporated herein by reference. All
capitalized terms shall have the meanings set forth in the Sale Agreement.
2. Pursuant to the Sale Agreement, the Seller does hereby
sell, transfer, assign, set over and convey to the Purchaser all right, title
and interest of the Seller in and to the Receivables listed on Schedule 1 hereto
(each, a "Receivable") and the Purchaser does hereby purchase each such
Receivable.
3. Pursuant to the Sale Agreement, the Seller does hereby
contribute, transfer, assign, set over and convey to the Purchaser, without
recourse, all right, title and interest of the Seller in and to the Receivables
listed on Schedule 1 hereto (each, a "Contributed Receivable") and the Purchaser
does hereby accept such contribution to its stated capital.
4. The Unpaid Principal Balance for the Receivables sold and
purchased hereby is $[__]. The Receivable Acquisition Price for the Receivables
sold and purchased hereby is $[__], representing the lesser of (i) 90% of the
Unpaid Principal Balance on the date hereof, or (ii) 90% of the aggregate market
value of such Receivables. The Receivable Acquisition Price shall be payable in
full contemporaneously with the execution of this Sale Assignment.
<PAGE>
ex-receivable sale agreement
IN WITNESS WHEREOF, the parties have caused this Sale
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
TRENDWEST RESORTS, INC.,
as Seller
By: _________________________
Name:
Title:
TW HOLDINGS II, INC.,
as Purchaser
By: ________________________
Name:
Title:
<PAGE>
ex-receivable sale agreement
SCHEDULE 1
SCHEDULE OF RECEIVABLES
<PAGE>
ex-receivable sale agreement
EXHIBIT B
TO
RECEIVABLE SALE AGREEMENT
DATED AS OF APRIL 15, 1999
BY AND BETWEEN
TRENDWEST RESORTS, INC.
AND
TW HOLDINGS II, INC.
[FORM OF REPURCHASE ASSIGNMENT]
REPURCHASE ASSIGNMENT (this "Purchase Assignment"), dated as of
April [__], 1999 between Trendwest Resorts, Inc. (the "Seller") and
TW Holdings II, Inc. (the "Purchaser")] [ASSIGNEE OF THE PURCHASER].
We refer to the Receivable Sale Agreement (the "Agreement"), dated as
of April 15, 1999, by and between the Seller and the Purchaser. All capitalized
terms used and not otherwise defined herein shall have the meanings set forth in
the Agreement.
Pursuant to Section 5(d) of the Agreement, the Purchaser [ASSIGNEE OF
THE PURCHASER] does hereby sell, transfer, assign, set over and convey to the
Seller, without recourse or warranty, express or implied, all right, title and
interest of the Purchaser [ASSIGNEE OF THE PURCHASER] in and to the Receivables
listed on Schedule 1 attached hereto and made a part hereof (each, a
"Repurchased Receivable"), in consideration for receipt of the aggregate
Repurchase Price for such Repurchased Receivables, and the Seller does hereby
purchase each such Repurchased Receivable.
The Repurchase Price for each Repurchased Receivable is set forth on
Schedule 1 attached hereto and made a part hereof.
THIS PURCHASE ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAW.
<PAGE>
ex-receivable sale agreement
IN WITNESS WHEREOF, the parties have caused this Repurchase
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
TRENDWEST RESORTS, INC.
By: ___________________________
Name:
Title:
TW HOLDINGS II, INC.
By: __________________________
Name:
Title:
[ASSIGNEE OF THE PURCHASER]
CREDIT AGREEMENT
TW HOLDINGS II, INC.
(as Borrower),
TRENDWEST RESORTS, INC.
and
PRUDENTIAL SECURITIES CREDIT CORPORATION
(as Lender)
Dated as of April 15, 1999
<PAGE>
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1. COMMITMENT............................................................................................1
Section 1.1. Advances .................................................................................1
Section 1.2. Borrowings; Closings.......................................................................2
Section 1.3. Borrowing Notices..........................................................................2
Section 1.4. Amount of Advances.........................................................................3
Section 1.5. Indenture .................................................................................3
Section 1.6. Term .................................................................................3
Section 1.7. Payment Instructions.......................................................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES........................................................................4
Section 2.1. General Representations and Warranties of the Borrower.....................................4
Section 2.2. General Representations and Warranties of TWRI and the Borrower............................6
Section 2.3. Representations and Warranties with Respect to the Receivables............................10
SECTION 3. CONDITIONS OF OBLIGATION TO MAKE INITIAL ADVANCE ON INITIAL FUNDING DATE.............................15
Section 3.1. Other Agreements..........................................................................15
Section 3.2. Opinion of Special Counsel................................................................15
Section 3.3. Reserved ................................................................................15
Section 3.4. Opinion of Trustee's Counsel..............................................................15
Section 3.5. Organizational and Other Documents........................................................15
Section 3.6. Necessary Consents........................................................................15
Section 3.7. Representations True; No Event of Default.................................................15
Section 3.8. Engagement Letter.........................................................................16
Section 3.9. Perfection ...............................................................................16
Section 3.10. Bankruptcy Issues.........................................................................16
SECTION 4. CONDITIONS OF OBLIGATION TO MAKE ADVANCES ON ANY FUNDING DATE........................................16
Section 4.1. Performance of Obligations................................................................16
Section 4.2. Representations True; No Event of Default.................................................16
Section 4.3. No Merger or Change in Control............................................................17
Section 4.4. Searches ................................................................................17
Section 4.5. Consents and Approvals....................................................................17
Section 4.6. Proceedings, Instruments, etc.............................................................17
Section 4.7. Other Documents...........................................................................17
Section 4.8. Continuance of an Event of Default........................................................17
Section 4.9. Validity of Notes.........................................................................17
Section 4.10. Trust Receipt............................................................................17
Section 4.11. UCC-1 Financing Statements...............................................................18
SECTION 5. CERTAIN SPECIAL RIGHTS...............................................................................18
Section 5.1. Home Office Payment.......................................................................18
Section 5.2. Certain Taxes.............................................................................18
Section 5.3. Substitution of Lender....................................................................19
SECTION 6. ADVANCE MATURITY; ADVANCE PREPAYMENTS................................................................19
Section 6.1. Advance Maturity..........................................................................19
Section 6.2. Mandatory Prepayments.....................................................................19
Section 6.3. Voluntary Prepayments......................................................................20
SECTION 7. ASSIGNMENTS AND PARTICIPATIONS........................................................................20
Section 7.1. Assignments ...............................................................................20
Section 7.2. Participations............................................................................21
SECTION 8. CERTAIN COVENANTS OF THE BORROWER....................................................................21
SECTION 9. CERTAIN COVENANTS OF TWRI............................................................................26
Section 9.1. Existence ................................................................................26
Section 9.2. Compliance with Law, etc..................................................................26
Section 9.3. Payment of Taxes and Claims...............................................................27
Section 9.4. Inspection. .............................................................................27
Section 9.5. Consolidation and Merger..................................................................27
Section 9.6. Control ................................................................................27
Section 9.7. Tax Returns...............................................................................27
Section 9.8. Protection of Right, Title and Interest....................................................28
Section 9.9. Further Assurances........................................................................29
Section 9.10. Independence.............................................................................29
Section 9.11. Other Agreements and Parties.............................................................30
Section 9.12. Insurance Coverage.......................................................................30
Section 9.13. Financial Covenants......................................................................30
Section 9.14. Reserved ................................................................................30
Section 9.15. Interest Rate Protection..................................................................30
Section 9.16. Break-up Fee..............................................................................31
Section 9.17. Reserved ................................................................................31
Section 9.18. Worldmark ................................................................................31
SECTION 10. INFORMATION TO BE FURNISHED TO LENDER...............................................................31
Section 10.1. Information to be Furnished by the Borrower or TWRI......................................31
SECTION 11. DEFAULTS, REMEDIES AND TERMINATION...................................................................33
Section 11.1. Events of Default........................................................................33
Section 11.2. Termination of Funding Obligation........................................................33
SECTION 12. INTERPRETATION OF AGREEMENT..........................................................................33
Section 12.1. Definitions..............................................................................33
Section 12.2. Accounting Terms.........................................................................33
Section 12.3. Governing Law............................................................................33
Section 12.4. Headings ................................................................................33
Section 12.5. Independence of Covenants, etc...........................................................33
SECTION 13. MISCELLANEOUS.......................................................................................33
Section 13.1. Notices ................................................................................33
Section 13.2. Survival ................................................................................34
Section 13.3. Successors and Assigns...................................................................34
Section 13.4. Amendment and Waiver.....................................................................34
Section 13.5. Counterparts.............................................................................35
Section 13.6. Reproduction of Documents................................................................35
Section 13.7. Consent to Jurisdiction and Venue........................................................35
Section 13.8. No Petition..............................................................................36
Section 13.9. Acts of Lender...........................................................................36
Section 13.10. Confidentiality.........................................................................37
</TABLE>
<PAGE>
Exhibit A: Form of Borrowing Notice
Exhibit B: TWRI Credit and Collection Policies
Exhibit C: Form of Installment Sale Contract
Annex A: Trendwest Warehouse Facility Definitions
<PAGE>
CREDIT AGREEMENT dated as of April 15, 1999 among TW Holdings
II, Inc., a Delaware corporation (the "Borrower"), Trendwest Resorts, Inc., an
Oregon corporation ("TWRI") and Prudential Securities Credit Corporation (the
"Lender").
WHEREAS, the Borrower has requested that the Lender make
advances to the Borrower and the Lender is prepared to make such advances upon
the terms and subject to the conditions hereof.
WHEREAS, the advances hereunder shall be evidenced by the
Borrower's variable funding notes (the "Notes"), issued to the Lender under a
trust indenture, dated as of April 15, 1999 (the "Indenture"), among the
Borrower, TWRI, the Custodian and LaSalle National Bank, as trustee (the
"Trustee").
WHEREAS, in connection with and pursuant to the terms and
conditions of an engagement letter dated April 15, 1999 (the "Engagement
Letter"), between TWRI and Prudential Securities Incorporated ("PSI"), an
affiliate of the Lender, the Lender is entering into this Agreement with the
Borrower and TWRI.
NOW, THEREFORE, in consideration of the covenants and the
agreements contained herein, the parties hereto agree as follows:
SECTION 1. COMMITMENT
Section 1.1. Advances. The Lender agrees, on the terms of this
Agreement and subject to the conditions hereof, to make Advances, beginning on
the date hereof and ending on the Commitment Termination Date, to the Borrower
in an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of the Commitment as then in effect. Each Advance shall (a)
mature on the Maturity Date and (b) bear interest from the date thereof until
such Advance shall be paid in accordance with the terms hereof (whether at
maturity, mandatory prepayment, by acceleration or otherwise) and payable on
each Payment Date in accordance with the provisions of Section 3.4 of the
Indenture. Interest shall be computed on an actual/360 basis, and on each
Payment Date shall equal all unpaid interest accrued in respect of the related
Interest Period. If the Borrower shall have paid or agreed to pay any interest
on any Advance in excess of that permitted by law, then it is the express intent
of the parties hereto with respect thereto that (i) to the extent possible given
the term of such Advance, all excess amounts previously paid or to be paid by
the Borrower be applied to reduce the principal amount of such Advance and the
provisions thereof immediately be deemed reformed and the amounts thereafter
collectable thereunder reduced, without the necessity of the execution of any
new document, so as to comply with the then applicable law, but so as to permit
the recovery of the fullest amount otherwise called for thereunder and (ii) to
the extent that the reduction of the principal amount of, and the amounts
collectible under, such Advance and the reformation of the provisions thereof
described in the immediately preceding clause (i) are not possible given the
term of such Advance, such excess amount shall be deemed to have been paid with
respect to such Advance as a result of an error, and, upon the Lender obtaining
actual knowledge of such error, such amount shall be refunded to the Borrower.
Each Advance shall be subject to mandatory prepayment as set forth in Section
6.2 hereof. All sums payable by the Borrower under this Agreement and the
Advances shall be paid without counterclaim, set-off, deduction or defense and
without abatement, suspension, deferment, diminution or reduction.
Section 1.2. Borrowings; Closings. (a) Subject to the
satisfaction of the conditions set forth in Sections 3 and 4, the initial
Advance is to be made on a date mutually agreed upon by the Borrower and the
Lender (the "Initial Funding Date"). Additional Advances may be made on
subsequent Business Days (each, a "Subsequent Funding Date", the Subsequent
Funding Dates, together with the Initial Funding Date, the "Funding Dates," and,
either the Initial Funding Date or a Subsequent Funding Date, a "Funding Date")
to the extent the Lender has received prior notice thereof in accordance with
the provisions of Section 1.3 hereof and the conditions set forth in Section 4
have been satisfied.
(a)(b) The Advances shall be evidenced by the Borrower's Notes
issued pursuant to the terms of the Indenture, payable to the Lender in a
principal amount equal to the maximum amount of the Commitment and as otherwise
duly completed. The date and amount of each Advance made by the Lender to the
Borrower, the applicable interest rate and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of the Notes, endorsed by the Lender on the schedule attached to
the Notes or any continuation thereof.
(c) The Lender shall be entitled to have the Notes subdivided,
by exchange for Notes of lesser denominations or otherwise in connection with an
assignment of all or any portion of the Advances and the Notes pursuant to the
terms of this Agreement; provided that in no event may the Notes be subdivided
into denominations of less than $500,000.
Section 1.3. Borrowing Notices. The Borrower will give notice
substantially in the form of Exhibit A hereto of each Advance (a "Borrowing
Notice") to the Lender, the Trustee and the Custodian, which notice shall be
irrevocable and effective only upon receipt by the Lender, the Trustee and the
Custodian. A Borrowing Notice for an Advance must be received by the Lender, the
Trustee and the Custodian not later than 1 p.m. New York City time on the second
Business Day prior to the proposed Funding Date of such Advance; provided,
however, that if the proposed Funding Date shall occur within the last ten
Business Days of a calendar quarter, a Borrowing Notice must be received by the
Lender, the Trustee and the Custodian not later than 1 p.m. New York City time
on the fifth Business Day prior to the proposed Funding Date. The Borrower may
not request more than one Advance in any one calendar week. Accompanying each
Borrowing Notice shall be a current true and correct Schedule of Receivables
containing the Required Information, in electronic format with hard copies
thereof, with respect to the Receivables that are the subject of the Borrowing
Notice.
Section 1.4. Amount of Advances. Except as provided in the
next paragraph, on each Funding Date, the Lender will make an Advance to the
Borrower in amount equal to the amount requested in the related Borrowing Notice
(which amount shall equal the Receivable Acquisition Price for the Eligible
Receivables to be funded by such Advance) available to the account of the
Borrower not later than 5:00 P.M. (New York City time). Such funds shall be made
available by the Lender to the Borrower in immediately available funds, by
deposit directly to an account designated by the Borrower to the Lender.
Notwithstanding the previous paragraph and anything herein to
the contrary, the Lender shall not be required to make an Advance in the amount
specified in the related Borrowing Notice to the Borrower if (i) the requested
Advance is in excess of the Available Facility Amount; (ii) a Borrowing Base
Deficiency exists, (iii) the requested Advance would, if such Advance were made,
cause a Borrowing Base Deficiency or (iv) the Lender has not received a Receipt
from the Custodian. In the event of (i), (ii) or (iii), however, the Lender will
make an Advance equal to the lesser of (a) the Available Facility Amount, (b)
the amount of the Advance less an amount which would cure the Borrowing Base
Deficiency, or (c) one dollar less than the amount which would cause a Borrowing
Base Deficiency.
Section 1.5. Indenture. The Notes evidencing the
Advances made hereunder are to be secured pursuant to the Indenture. The
Assets allocated to secure the Borrower's obligations under this Agreement are
set forth in the Indenture.
Section 1.6. Term. The Commitment will terminate on the
Commitment Termination Date.
Section 1.7. Payment Instructions. Each of the Lender and TWRI
shall provide written payment instructions (including the account number of the
bank account to which payments are to be directed and the name, address and ABA
number of the bank in which such account is maintained, if payments are to be
made to such party by the wire transfer of immediately available funds) to the
Trustee. No later than the second Business Day of each month, the Lender shall
also provide an invoice to TWRI, the Borrower, the Trustee and the Master
Servicer in respect of the Notes Interest due for the related Payment Date.
Failure to provide such notice shall not affect such party's right to receive
any funds to which it is otherwise entitled in accordance with the Warehouse
Facility Documents, but failure to deliver such notice may result in a delay in
the receipt of such funds.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Each of the Borrower and TWRI represents and warrants to the
Lender, as of the date hereof, and as of each Funding Date, as follows:
Section 2.1. General Representations and Warranties of the
Borrower.
(a) Due Formation; Valid Existence and Good Standing. The
Borrower is a corporation duly organized and validly existing in good standing
under the laws of the jurisdiction of its formation; and is duly qualified to do
business as a foreign corporation or corporation and in good standing under the
laws of each jurisdiction where the character of its property, the nature of its
business or the performance of its obligations under this Agreement makes such
qualification necessary except where the failure to be so qualified will not
have a material adverse effect on the business of the Borrower or its ability to
perform its obligations under this Agreement or any other documents or
transactions contemplated hereunder or the validity or enforceability of the
Receivables.
(b) Possession of Licenses, Certificates, Franchises and
Permits. The Borrower holds all material licenses, certificates, franchises and
permits from all governmental authorities necessary for the conduct of its
business and has received no notice of proceedings relating to the revocation of
any such license, certificate, franchise or permit, which singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect the business of the Borrower or its ability to
perform its obligations under this Agreement or any other documents or
transactions contemplated hereunder or the validity or enforceability of the
Receivables.
(c) Authority and Power. The Borrower has all requisite power
and authority to own its properties, to conduct its business, to execute and
deliver this Agreement and all documents (including the Assignments from it to
TWRI or the Trustee) and transactions contemplated hereunder and to perform all
of its obligations under this Agreement and any other documents or transactions
contemplated hereunder. The Borrower has all requisite power and authority to
originate, acquire, own, purchase and receive from TWRI the Receivables.
(d) Authorization, Execution and Delivery; Valid and Binding.
This Agreement and all other documents and instruments required or contemplated
hereby to be executed and delivered by the Borrower have been duly authorized,
executed and delivered by the Borrower and, assuming the due execution and
delivery by the other party or parties hereto and thereto, constitute legal,
valid and binding agreements enforceable against the Borrower in accordance with
their respective terms subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the enforceability of creditors' rights generally applicable in the
event of the bankruptcy, insolvency or reorganization of the Borrower and to
general principles of equity.
(e) No Violation of Law, Rule, Regulation, etc. The execution,
delivery and performance by the Borrower of this Agreement and any other
documents (including the Assignments from it to the Trustee) and transactions in
connection herewith to which the Borrower is a party do not (i) violate any of
the provisions of the Articles of Incorporation or by-laws of the Borrower, (ii)
violate any provision of any law, governmental rule or regulation currently in
effect applicable to the Borrower or its properties or by which the Borrower or
its properties may be bound or affected, including, without limitation, any bulk
transfer laws, (iii) violate any judgment, decree, writ, injunction, award,
determination or order currently in effect applicable to the Borrower or its
properties or by which the Borrower or its properties are bound or affected,
(iv) conflict with, or result in a breach of, or constitute a default under, any
of the provisions of any indenture, mortgage, deed of trust, contract or other
instrument to which the Borrower is a party or by which it is bound or (v)
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, mortgage, deed of trust, contract
or other instrument.
(f) Governmental Consent. No consent, approval, order or
authorization of, and no filing with or notice to, any court or other
governmental authority in respect of the Borrower is required in connection with
the authorization, execution, delivery or performance by the Borrower of this
Agreement or any of the other documents or transactions contemplated hereunder,
including, without limitation, the Assignment and the sale of the Receivables.
(g) Fair Consideration. The Borrower paid fair consideration
and reasonably equivalent value in exchange for the purchase of the Receivables
from TWRI.
(h) Bulk Transfer. No contribution, sale, transfer, assignment
or conveyance of Receivables by TWRI to the Borrower contemplated by the
Receivable Sale Agreement will be subject to the bulk transfer or any similar
statutory provisions in effect in any applicable jurisdiction.
(i) Place of Business. The principal place of business and
chief executive office of the Borrower are located at the address set forth in
the Indenture.
Section 2.2. General Representations and Warranties of TWRI
and the Borrower.
As specified, TWRI and/or the Borrower each represents and
warrants to the Lender, as of the date hereof, and as of each Funding Date, as
follows:
(a) Organization and Authority. TWRI:
(i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Oregon;
(ii) has all requisite power and authority to own and operate
its properties and to conduct its business as currently conducted and as
proposed to be conducted as contemplated by the Warehouse Facility Documents to
which it is a party, to enter into the Warehouse Facility Documents to which it
is a party and to perform its obligations under the Warehouse Facility Documents
to which it is a party; and
(iii) has made all filings and holds all material franchises,
licenses, permits and registrations which are required under the laws of each
jurisdiction in which the properties owned (or held under lease) by it or the
nature of its activities makes such filings, franchises, licenses, permits or
registrations necessary.
(b) Place of Business. The address of the principal place of
business and chief executive office of TWRI is Trendwest Resorts, Inc., 9805
Willows Road, Redmond, Washington 98052 and other than 12301 N.E. 10th Place,
Bellevue, Washington 98005 , there have been no other such locations during the
immediately preceding three years.
(c) Compliance with Other Instruments, etc. TWRI is not in
violation of any term of its articles of incorporation or by-laws. The
execution, delivery and performance by TWRI of the Warehouse Facility Documents
to which it is a party do not and will not (i) conflict with or violate the
articles of incorporation or by-laws of TWRI, (ii) conflict with or result in a
breach of any of the terms, conditions or provisions of, or constitute a default
under, or result in the creation of any Lien on any of the properties or assets
of TWRI pursuant to the terms of any instrument or agreement to which TWRI is a
party or by which it is bound, or (iii) require any consent of or other action
by any trustee or any creditor of, any lessor to or any investor in TWRI.
(d) Compliance with Law. TWRI is in compliance with all
statutes, laws and ordinances and all governmental rules and regulations to
which it is subject, the violation of which, either individually or in the
aggregate, could materially adversely affect the business, earnings, properties
or condition (financial or other) of TWRI, each taken as a whole. The policies
and procedures set forth in the TWRI Credit and Collection Policies are in
material compliance with all applicable statutes, laws and ordinances and all
governmental rules and regulations. The execution, delivery and performance of
the Warehouse Facility Documents to which it is a party do not and will not
cause TWRI to be in violation of any law or ordinance, or any order, rule or
regulation, of any federal, state, municipal or other governmental or public
authority or agency.
(e) Pending Litigation or Other Proceedings. There is no
pending or, to the best of TWRI's or Borrower's knowledge, threatened action,
suit, proceeding or investigation before any court, administrative agency,
arbitrator or governmental body against or affecting TWRI or the Borrower, as
applicable, which, if decided adversely, would materially and adversely affect
(i) the condition (financial or otherwise), business or operations of TWRI or
the Borrower, as applicable (ii) the ability of the Borrower to perform its
obligations under, or the validity or enforceability of this Agreement or any
other documents or transactions contemplated under this Agreement, (iii) such
Person's Vacation Credits or title of any Obligor to any Vacation Credits or
(iv) the Trustee's ability to foreclose or otherwise enforce the Liens of the
Receivables.
(f) No Deficiency Accumulation. As of the Funding Date, the
Borrower has not incurred any "accumulated funding deficiency" (as such term is
defined under the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code) with respect to any "employee benefit plan" (as such
term is defined under ERISA) sponsored by the Borrower.
(g) Taxes. TWRI and the Borrower have each timely filed all
tax returns (Federal, state and local) which are required to be filed and has
paid all taxes related thereto, other than those which are being contested in
good faith or which have been previously disclosed to the Lender.
(h) Transactions in Ordinary Course. The transactions
contemplated by this Agreement are in the ordinary course of business of TWRI
and the Borrower.
(i) Securities Laws. Neither TWRI nor the Borrower is an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(j) Proceedings. Each of TWRI and the Borrower has taken all
action necessary to authorize the execution and delivery by it of the Warehouse
Facility Documents to which it is a party and the performance of all obligations
to be performed by it under the Warehouse Facility Documents.
(k) Defaults. Neither TWRI nor the Borrower is in default
under any material agreement, contract, instrument or indenture to which it is a
party or by which it or its properties is or are bound, or with respect to any
order of any court, administrative agency, arbitrator or governmental body which
would have a material adverse effect on the transactions contemplated hereunder;
and to TWRI's or the Borrower's knowledge, as applicable, no event has occurred
which with notice or lapse of time or both would constitute such a default with
respect to any such agreement, contract, instrument or indenture, or with
respect to any such order of any court, administrative agency, arbitrator or
governmental body.
(l) Insolvency. TWRI is solvent and will not be rendered
insolvent by the transfer of the Receivables by TWRI to the Borrower. Prior to
the date hereof, TWRI did not, and is not about to, engage in any business or
transaction for which any property remaining with TWRI would constitute an
unreasonably small amount of capital. In addition, TWRI has not incurred debts
that would be beyond TWRI's ability to pay as such debts matured.
(m) No Consents. No prior consent, approval or authorization
of, registration, qualification, designation, declaration or filing with, or
notice to any federal, state or local governmental or public authority or
agency, is, was or will be required for the valid execution, delivery and
performance by TWRI of the Warehouse Facility Documents to which it is a party.
TWRI has obtained all consents, approvals or authorizations of, made all
declarations or filings with, or given all notices to, all federal, state or
local governmental or public authorities or agencies which are necessary for the
continued conduct by TWRI of its respective businesses as now conducted, other
than such consents, approvals, authorizations, declarations, filings and notices
which, neither individually nor in the aggregate, materially and adversely
affect, or in the future will materially and adversely affect, the business,
earnings, prospects, properties or condition (financial or other) of TWRI.
(n) Name. The legal names of TWRI and the Borrower are as set
forth in this Agreement, and neither TWRI nor the Borrower has any tradenames,
fictitious names, assumed names or "doing business as" names.
(o) Repayment of Receivables. Neither TWRI nor the Borrower
has any reason to believe that, at the time of the sale of the Receivables by
TWRI and the purchase of the Receivables by the Borrower, the obligations
thereunder will not be paid in full.
(p) Validity of Agreement. The Warehouse Facility Documents to
which it is a party have been duly executed and delivered by TWRI and constitute
the legal, valid and binding obligation of TWRI, enforceable in accordance with
their terms, except as enforceability may be limited by (a) bankruptcy,
insolvency, liquidation, receivership, moratorium, reorganization or other
similar laws affecting the enforcement of the rights of creditors generally, and
(b) general principals of equity, whether enforcement is sought in a proceeding
in equity or at law.
(q) Representations and Warranties in Warehouse Facility
Documents. (i) The representations of TWRI contained in any document,
certificate or instrument delivered pursuant to the Warehouse Facility Documents
are true and correct in all material respects, and the Lender may rely on such
representations and warranties, if not made directly to the Lender, as if such
representations and warranties were made directly to the Lender.
(r) Information. No document, certificate or report furnished
by TWRI and the Borrower, in writing, pursuant to this Agreement or in
connection with the transactions contemplated hereby, contains or will contain
when furnished any untrue statement of a material fact or fails or will fail to
state a material fact necessary in order to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading. There are no facts relating to the Borrower as of the related
Funding Date which when taken as a whole, materially adversely affect the
financial condition or assets or business of TWRI and Borrower, or which may
impair the ability of TWRI or the Borrower to perform its obligations under this
Agreement, which have not been disclosed herein or in the certificates and other
documents furnished by or on behalf of TWRI or the Borrower pursuant hereto or
thereto specifically for use in connection with the transactions contemplated
hereby or thereby.
(s) Intent. TWRI did not sell any Receivable to the Borrower
with any intent to hinder, delay or defraud any of its respective creditors.
(t) Engagement Letter. PSI, an affiliate of the Lender and
TWRI have entered into the Engagement Letter, and TWRI is not in default under
the Engagement Letter.
(u) Treatment as Sale. The Borrower will treat the transfer of
the Receivables from TWRI to Borrower as a sale for legal and accounting
purposes. If a third party, including a potential purchaser of the Receivables,
should inquire, TWRI will promptly indicate that the Receivables have been sold
and will claim no ownership interest therein.
(v) Representations and Warranties Updated. The
representations and warranties set forth above shall be deemed repeated on, and
made as of, each Funding Date.
Section 2.3. Representations and Warranties with Respect to
the Receivables. (a) With respect to each Receivable, each of TWRI and the
Borrower represents and warrants to the Lender, as of the related Funding Date,
that:
(i) All Federal, state and local laws, rules and
regulations, including, without limitation, those relating to
usury, truth-in-lending, the offer and sale of securities,
consumer credit protection and equal credit opportunity or
disclosure, applicable to such Receivable or the sale of the
timeshare interest securing such Receivable have been complied
with in all material respects. No Receivable was originated
in, or is subject to the laws of, any jurisdiction under which
the sale, transfer, conveyance or assignment of such
Receivable would be unlawful, void or voidable.
(ii) Each Receivable Document is genuine, there are
no more than two (one of which was delivered to the related
Obligor at the time of execution) originals of the Installment
Sale Contract and each Receivable Document is the legal, valid
and binding obligation of the maker thereof, enforceable in
accordance with its terms (except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity, regardless of
whether such enforceability shall be considered in a
proceeding in equity or at law), and is not subject to any
dispute, right of rescission, setoff, abatement, diminution,
recoupment, counterclaim or defense of any kind.
(iii) All parties to the related Installment Sale
Contract had legal capacity to enter into such Installment
Sale Contract and to execute and deliver such related
Installment Sale Contract and the related Installment Sale
Contract has been duly and properly executed by such parties.
Any amendments to such related Installment Sale Contract or
any other related Receivable Document required as a result of
any mergers involving the Borrower or its predecessors, to
maintain the rights of the Borrower or its predecessors
thereunder as an obligee have been completed.
(iv) The Receivable has not been satisfied, canceled,
rescinded or subordinated, in whole or in part; no portion of
the Vacation Credits has been released from the Lien created
by the Installment Sale Contract, in whole or in part; no
instrument has been executed that would effect any such
satisfaction, cancellation, rescission, subordination or
release. The terms of the Installment Sale Contract do not
provide for a release of any portion of the Vacation Credits
from the Lien created by the Installment Sale Contract except
upon the payment of the Receivable in full.
(v) Immediately prior to the conveyance to the
Trustee of a Receivable, the Borrower will own full legal and
equitable title to such Receivable, free and clear of any Lien
or participation or ownership interest in favor of any other
Person, and had full right and authority to sell, transfer and
assign such Receivable.
(vi) At the time TWRI executed and delivered the
Installment Sale Contract, TWRI had full power and authority
to originate such Receivable.
(vii) The related Installment Sale Contract contains
customary and enforceable provisions so as to render the
rights and remedies of the holder thereof adequate for the
realization against the related Vacation Credits of the
benefits of the security interests intended to be provided
thereby.
(viii) The Borrower and any of its Affiliates and, to
the best of the Borrower's knowledge, each other party which
has had an interest in the Installment Sale Contract is (or,
during the period in which such party held and disposed of
such interest, was) in compliance with any and all applicable
filing, licensing and "doing business" requirements of the
laws of the State of Washington to the extent necessary to
permit the Borrower to maintain or defend actions or
proceedings with respect to the Receivable in all appropriate
forums in such state without any further act on the part of
any such party.
(ix) The related Installment Sale Contract is not and
has not been secured by any collateral except the related
Vacation Credits.
(x) The related Installment Sale Contract evidences a
fully amortizing debt obligation which bears a fixed rate of
interest and provides for level monthly payments of principal
and interest (which is calculated on a simple interest basis).
The related Installment Sale Contract is payable in U.S.
Dollars.
(xi) The maximum original term of the related
Installment Sale Contract is less than or equal to seven
years.
(xii) The Receivable is not more than 30 days
past due in respect of any payment of principal or
interest as of the Cut-off Date.
(xiii) All applicable intangible taxes and
documentary stamp taxes, if any, were paid as to the related
Installment Sale Contract.
(xiv) The proceeds of each Receivable have been fully
disbursed, there is no obligation to make future advances or
to lend additional funds under the originator's commitment or
the documents and instruments evidencing or securing the
Receivable and no such advances or Receivables have been made
since the origination of the Receivable.
(xv) The terms of each Installment Sale Contract have
not been impaired, waived, altered or modified in any respect,
except by written instruments which are part of the related
Receivable Documents. No other instrument has been executed or
agreed to which would effect any such impairment, waiver,
alteration or modification. No Obligor has been released from
liability on or with respect to any Receivable, in whole or in
part, except in such cases where such release would not
materially and adversely affect the obligee's security for the
related Receivable, and any such release is reflected by a
written instrument which is a part of the related Receivable
Documents.
(xvi) Each Receivable was acquired by the Borrower or
originated by TWRI in the normal course of its business. Each
Receivable originated by TWRI was underwritten in accordance
with the Credit and Collection Policies and the downpayment
related to each Receivable was equal to at least 10% of the
purchase price of the related Vacation Credits. The
origination, servicing and collection practices used by TWRI
and its Affiliates with respect to each Receivable have been
in all respects, legal, proper, prudent and customary and are
in accordance with the Credit and Collection Policies. The
related Installment Sale Contract is substantially in the form
attached hereto as Exhibit C.
(xvii) The related Installment Sale Contract is
assignable to and by the obligee and its successors and
assigns, and the related Vacation Credits are assignable upon
liquidation of the related Receivable, without the consent of
any other Person, and there are no other restrictions on
resale thereof.
(xviii) The Security Interest created by the related
Installment Sale Contract is and will be prior to any Lien on,
or other interests relating to, the Vacation Credits.
(xix) The related Obligor is not the subject of a
voluntary or involuntary bankruptcy proceeding and is not an
Affiliate of the Borrower.
(xx) There is no default, breach, violation or event
of acceleration existing under the related Installment Sale
Contract or any other document or instrument evidencing,
guaranteeing, insuring or otherwise securing the Receivable,
and no event which, with the lapse of time or with notice and
the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration
thereunder; and the Borrower has not waived any such material
default, breach, violation or event of acceleration under the
Installment Sale Contract or any other related document.
(xxi) There is no current obligation on the part of
any other person (including any buy down arrangement) to make
payments on behalf of the Obligor in respect of the
Receivable.
(xxii) The entries with respect to such Receivable as
set forth on the Schedule of Receivables are true and correct
as of the related Cut-off Date.
(xxiii) Each rescission period applicable to the
Receivable has expired.
(xxiv) No selection procedures were intentionally
utilized by TWRI or the Borrower which were adverse to the
Trustee or the Lender were utilized in selecting the
Receivables sold to the Borrower and pledged to the Trustee
pursuant to the Indenture, respectively.
(xxv) The weighted average of Receivable Coupon Rates
of the Receivables is at least 13.5%.
(xxvi) Each Receivable which has been acquired by the
Borrower and Granted to the Trustee was owned by the Borrower,
prior to the Borrower's acquisition thereof, free and clear of
all Liens and is secured by Vacation Credits in Worldmark.
(xxvii) (A) The percentage of Eligible Receivables
having Foreign Obligors (other than Canadian Obligors) does
not exceed 1.0% of the aggregate Unpaid Principal Balance of
all Trust Estate Receivables which are Eligible Receivables,
and (B) the percentage of Eligible Receivables having Canadian
Obligors does not exceed 6.0% of the aggregate Unpaid
Principal Balance of all Trust Estate Receivables which are
Eligible Receivables.
(xxviii) Worldmark is a nonprofit mutual benefit
corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its formation.
(xxix) Worldmark has all requisite power and
authority to own its properties, to conduct its business, to
execute and deliver the Installment Sale Agreements.
(xxx) Worldmark is the owner of each Resort free and
clear of any liens or encumbrances subject only to (a) the
lien of real property taxes, ground rents, water charges,
sewer rents and assessments not yet due and payable, and (b)
covenants, conditions and restrictions, rights of way,
easements and other matters of public records, none of which,
individually or in the aggregate, materially interferes with
the current or intended use of the Resorts.
(xxxi) The issuance and transfer of Vacation Credits
in Worldmark do not and will not require registration under
the Securities Act.
(xxxii) The Vacation Credits entitle the owner
thereof to the use of all existing and future Resorts operated
by or associated with the Worldmark, to vote and participate
in corporate ownership and management of the real estate and
other assets of Worldmark; and ownership is perpetual.
(xxxiii) The Vacation Credits related to each
Receivable is free and clear of all Liens.
(xxxiv) Immediately prior to the sale, transfer and
assignment of the Receivables to the Borrower, TWRI had good
marketable title to, and was the sole owner of, each
Receivable, and had full right and authority to sell, transfer
and assign such Receivable.
(xxxv) The Receivable is similar to and meets the
criteria (other than seasoning criteria) of other receivables
previously securitized in a transaction rated by a Rating
Agency.
(xxxvi) Except for Upgrades, the related Obligor has
made at least one Payment in respect of the related
Receivable.
(xxxvii) The percentage of Eligible Receivables
having a single Obligor or affiliated Obligors does not exceed
1% of the aggregate Unpaid Principal Balance of all Eligible
Receivables.
It is understood and agreed that the representations and
warranties set forth in this Section 2.3 shall survive the sale or contribution
of a Receivable to the Borrower and any pledge of such Receivable by the
Borrower to the Trustee pursuant to the Indenture and shall continue so long as
any such Receivable shall remain outstanding until such time as such Receivable
is removed pursuant to the Indenture.
SECTION 3. CONDITIONS OF OBLIGATION TO MAKE INITIAL ADVANCE ON INITIAL
FUNDING DATE.
The Lender's obligation to make the initial Advance hereunder
on the Initial Funding Date shall be subject to the satisfaction, prior to or
concurrently with the making of such Advance, of the conditions set forth in
Section 4 hereof, as well as the following conditions:
Section 3.1. Other Agreements. The Warehouse Facility
Documents and the Notes shall each have been duly authorized by all necessary
action. The Borrower and TWRI shall have duly executed and delivered the
Warehouse Facility Documents to which they are a party and, in the case of the
Borrower, the Notes and such Warehouse Facility Documents are in full force and
effect.
Section 3.2. Opinion of Special Counsel. The Lender shall have
received from Chapman and Cutler, counsel for TWRI and the Borrower in
connection with the transactions contemplated by this Agreement, opinions, dated
the Initial Funding Date, in a form satisfactory to the Lender and its counsel.
Section 3.3. Reserved.
Section 3.4. Opinion of Trustee's Counsel. The Lender
shall have received the opinion of counsel to the Trustee, in form and
substance satisfactory to the Lender.
Section 3.5. Organizational and Other Documents. The Lender
shall have received certified copies of the organizational documents of the
Borrower, TWRI and Worldmark and of all formalities authorizing the execution,
delivery and performance hereof and of the Warehouse Facility Documents to which
each is a party and, in the case of the Borrower, the Notes. The Borrower shall
be a special purpose bankruptcy remote corporation in a form satisfactory to the
Lender.
Section 3.6. Necessary Consents. The Lender shall have
received a copy of all consents to, or releases of any lien in respect to any
Receivables subject or to be subject hereto, in form and substance satisfactory
to the Lender.
Section 3.7. Representations True; No Event of Default. The
representations and warranties of the Borrower and TWRI pursuant to Sections 2.1
and 2.2 shall be true on and as of such Funding Date, and the representations
and warranties with respect to the Receivables pursuant to Section 2.3 shall be
true on and as of the related Funding Date. There shall exist on such Funding
Date no Default or Event of Default hereunder or under the Indenture.
Section 3.8. Engagement Letter. TWRI shall have paid all
fees due under the Engagement Letter.
Section 3.9. Perfection and Priority. The Lender shall have a
first perfected security interest in the Trust Estate (other than the Vacation
Credits). The Lender shall have received (i) a written search report listing all
effective financing statements that name TWRI or the Borrower as "debtor" or
"assignor" covering the States of Washington and Oregon and such other
jurisdictions as the Lender may reasonably require, together with copies of such
financing statements; and no such financing statements shall cover any portion
of the Trust Estate, (ii) evidence satisfactory to the Lender that the pledge of
the Assets to the Trustee has been duly perfected by the filing of all necessary
UCC financing statements and the taking of all such other or additional acts as
may be necessary to grant the Lender a perfected security interest in the Trust
Estate, and (iii) an opinion as to the foregoing from Chapman and Cutler, dated
the Initial Funding Date, in a form satisfactory to the Lender and its counsel.
Section 3.10. Bankruptcy Issues. The Lender shall have
received a true sale bankruptcy opinion from Chapman and Cutler, dated the
Initial Funding Date, in connection with the Receivables Sale Agreement, in a
form satisfactory to the Lender and its counsel.
SECTION 4. CONDITIONS OF OBLIGATION TO MAKE ADVANCES ON ANY FUNDING DATE.
The Lender's obligation to make Advances hereunder on any
Funding Date shall be subject to the satisfaction, prior to or concurrently with
the making of such Advances, of the following conditions:
Section 4.1. Performance of Obligations. The Borrower and TWRI
shall each have performed in all material respects all of their respective
obligations to be performed hereunder prior to or on such Funding Date.
Section 4.2. Representations True; No Event of Default. The
representations and warranties of the Borrower and TWRI pursuant to Sections 2.1
and 2.2 shall be true on and as of such Funding Date, and the representations
and warranties with respect to the Receivables pursuant to Section 2.3 shall be
true on and as of the related Funding Date with the same effect as though such
representations and warranties had been made on and as of such Funding Date.
There shall exist on such Funding Date no Default or Event of Default hereunder
or under the Indenture.
Section 4.3. No Merger or Change in Control. Neither TWRI nor
the Borrower shall have dissolved or liquidated or consolidated or merged with,
or been wound up into, or sold, leased or otherwise disposed of all or
substantially all of its Properties to, any Person (other than a merger into a
wholly-owned Subsidiary for the purposes of reincorporation).
Section 4.4. Searches. The Borrower shall have delivered to
the Lender such evidence (including without limitation, Uniform Commercial Code
search certificates, releases and termination statements) as the Lender may
request to establish that there are no financing statements filed against the
Assets other than with respect to Permitted Liens.
Section 4.5. Consents and Approvals. The Borrower and TWRI
shall have obtained any necessary consents, waivers, approvals, authorizations,
registrations, filings, licenses and notifications (including, if necessary,
qualifying to do business in, and qualifying under the applicable consumer laws
of, each jurisdiction where the Borrower and TWRI is then doing business, or is
expected to be doing business utilizing the proceeds of such Advance) and the
same shall be in full force and effect.
Section 4.6. Proceedings, Instruments, etc. All proceedings
and actions taken on or prior to such Funding Date in connection with the
transactions contemplated by this Agreement, the Warehouse Facility Documents
and the Note, and all instruments incident thereto, shall be in form and
substance reasonably satisfactory to the Lender, and the Lender shall have
received copies of all documents that the Lender may reasonably request in
connection with such proceedings, actions and transactions.
Section 4.7. Other Documents. The Borrower and TWRI shall have
delivered to the Lender such other documents, instruments, approvals (and if
requested certified duplication of executed copies thereof) and opinions as the
Lender may have reasonably requested. Each of the Warehouse Facility Documents
shall remain in full force and effect.
Section 4.8. Continuance of an Event of Default. No Event of
Default shall have occurred and be continuing.
Section 4.9. Validity of Notes. The Notes shall have been
duly and validly issued and outstanding and entitled to the benefits provided
by the Indenture.
Section 4.10. Receipt. The Lender shall, no later than one
Business Day prior to the related Funding Date, have received a Receipt from the
Custodian indicating that no material deficiencies exist with respect to the
Receivable Documents.
Section 4.11. UCC-1 Financing Statements Pursuant to the
Indenture, in connection with any Advance, the Borrower shall have delivered to
the Lender, original, executed UCC-1 financing statements with exhibits which
describe the collateral as the Receivables related to such Advance.
SECTION 5. CERTAIN SPECIAL RIGHTS.
Section 5.1. Home Office Payment. Notwithstanding any
provision to the contrary in the Warehouse Facility Documents, the Borrower will
punctually pay on each Payment Date from Available Funds in immediately
available funds prior to 2:00 pm, New York City time, all amounts payable with
respect to the Advances in accordance with the provisions of this Agreement and
the Indenture (without the necessity for any presentation or surrender thereof
or any notation of such payment thereon) in the manner and at any address as the
Lender may from time to time direct in writing. The Lender agrees that, as
promptly as practicable after the payment or prepayment of any Advance, the
Lender will record such payment or prepayment on the Notes. The Borrower will
afford the benefits of this Section 5.1 to any Assignee, each of which, by its
receipt and acceptance of a Notes, will be deemed to have made the same
agreement relating to the Advances as the Lender has made in this Section 5.1.
The Borrower shall only be obligated to make payments on any Advance to an
Assignee in the manner provided in this Section 5.1 from and after the time such
Assignee provides to the Borrower and the Trustee written notice of its election
to receive payments in such manner and the address to which payments are to be
directed (including the account number of Assignee's bank account to which
payments are to be directed and the name, address and ABA number of the bank in
which such account is maintained, if payments are to be made to such Assignee by
the wire transfer of immediately available funds).
Section 5.2. Certain Taxes. The Borrower will pay all Taxes
(other than income or franchise taxes incurred by the Lender) in connection with
the execution and delivery of this Agreement and the Indenture, the issuance of
the Note(s) by the Borrower, the borrowings hereunder and any modification of
the Warehouse Facility Documents or the Notes requested or required by the
Borrower and will save the Lender harmless, without limitation as to time,
against any and all liabilities (including, without limitation, any interest or
penalty for nonpayment or delay in payment, or any income taxes paid by the
Lender or any Assignee in connection with any reimbursement by the Borrower for
the payment by any other Person of any such taxes) with respect to all such
taxes. The obligations of the Borrower under this Section 5.2 shall survive the
payment in full of the Advances and the termination of the Warehouse Facility
Documents.
Section 5.3. Substitution of Lender. The Lender shall have the
right to substitute any of the Lender's Affiliates as the maker of all or any
portion of the aggregate principal amount of Advances to be made by the Lender,
by written notice delivered to the Borrower, which notice shall be signed by
both the Lender and such Affiliate and shall contain such Affiliate's agreement
to be bound by this Agreement. The Borrower agrees that upon receipt of such
notice (a) wherever the word "the Lender" is used in this Agreement (other than
in this Section 5.3) such word shall be deemed to refer to such Affiliate in
addition to or instead of to the Lender, as the case may be, and (b) the Lender
shall, to the extent of the assumption by such Affiliate of the Lender's
obligations hereunder, be released from its obligations under this Agreement.
The Borrower also agrees that if the Lender, at any time, acquires from any
Affiliate all or any portion of such Affiliate's rights under this Agreement,
wherever the word "the Lender" is used in this Agreement such word shall
thereafter be deemed to refer to the Lender in addition to or instead of to such
Affiliate, as the case may be, and such Affiliate shall, to the extent of the
assumption by the Lender of such Affiliate's obligations hereunder, be released
from all of its obligations under this Agreement. Notwithstanding any other
provision of this Section 5.3, neither the Lender nor any Affiliate thereof
shall be entitled to substitute any other party as the maker of any Advances if
as a result of such substitution the Borrower would be required to register as
an "investment company" under the Investment Company Act of 1940, as amended.
SECTION 6. ADVANCE MATURITY; ADVANCE PREPAYMENTS.
Section 6.1. Advance Maturity. Each Advance shall be due and
payable on the related Maturity Date.
Section 6.2. Mandatory Prepayments. The Borrower shall
immediately prepay, or be deemed to have prepaid, the Advances, without premium,
together with interest accrued on the amount to be prepaid to the date of
prepayment and any unpaid fees with respect thereto, to the extent required on
each Payment Date pursuant to Section 3.4 of the Indenture. No prepayment
pursuant to this Section 6.2 shall in and of itself have any effect on the
obligation of the Lender to make Advances under this Agreement nor the right of
the Borrower to reborrow an amount equal to such repayment.
Upon the occurrence of an Event of Default, the Borrower
will make payments on the Advances in accordance with Section 11 hereof and
in the Indenture.
Section 6.3. Voluntary Prepayments. The Borrower may
prepay Advances in full, without premium, at any time.
SECTION 7. ASSIGNMENTS AND PARTICIPATIONS.
Section 7.1. Assignments. (a) The Borrower may not assign its
rights or obligations hereunder or under the Notes without the prior consent of
the Lender in its sole discretion (or, if multiple Lenders, the Lenders in
respect of a majority in aggregate principal amount of Advances outstanding).
(a)(b) Pursuant to the terms of the Indenture, the Lender may
assign to any person or entity all or any portion of the Advances and the Notes;
provided that any assignment of a portion of the Advances and the Notes shall be
in an amount not less than the Minimum Assignment Denomination, provided,
however, the Lender shall not sell or assign a portion of the Advances or Notes
to any purchasers which are (or the Affiliates thereof are) primarily engaged in
the business of timeshare development, without TWRI's prior written consent.
Upon written notice to the Borrower and the Trustee of an assignment in
accordance with the preceding sentence (which notice shall identify the Assignee
and the amount of the Advances and Notes assigned), the Assignee shall have, to
the extent of such assignment (unless otherwise provided in such assignment),
the obligations, rights and benefits of the Lender hereunder with respect to the
Advance(s) assigned to it. For all purposes of this Agreement, the Assignee
shall, so long as the Advance(s) assigned to such Assignee remain unpaid, be
entitled to the rights and benefits of this Agreement with respect to the
Advance(s) assigned to it as if (and the Borrower shall be directly obligated to
such Assignee under this Agreement as if) such Assignee were the "Lender" for
purposes of this Agreement. Accordingly, unless otherwise provided, whenever any
action, waiver, notice or consent is to be provided to or by the Lender as
herein specified, such action, waiver, notice or consent shall (unless otherwise
expressly specified herein) also be provided to or by each Assignee.
(c) The Lender shall provide written notice of each assignment
to the Trustee and TWRI; provided that failure to provide such notice shall not
affect the validity of any assignment.
(d) Notwithstanding the provisions of this Section 7.1, no
assignment of an interest in an Advance to an entity outside the United States
of America shall be effective unless the prospective Assignee thereof certifies
to the Borrower and TWRI that payments to it in respect of the Advances will not
be subject to withholding taxes imposed by any Governmental Authority in the
United States of America or any political subdivision or taxing authority
thereof or therein or that if it is subject to such withholding taxes it will
not seek reimbursement or gross-up from the Borrower or TWRI.
Section 7.2. Participations. (a) The Lender may sell or agree
to sell to any person or entity a participation in all or any part of any
Advance held by it or Advances made or to be made by it. All amounts payable by
the Borrower to the Lender under this Agreement shall be determined as if the
Lender had not sold or agreed to sell any participations in such Advance and as
if the Lender were funding all of such Advance in the same way that it is
funding the Advance in which no participations have been sold.
(a)(b) The Lender may furnish any information concerning the
Borrower, TWRI or any of their other Affiliates in the possession of the Lender
from time to time to assignees and participants.
SECTION 8. CERTAIN COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that so long as any Advance
shall remain unpaid:
(a) The Borrower shall be operated in such a manner that it
would not be substantively consolidated in the trust estate of any other Person
in the event of a bankruptcy or insolvency of such Person and in such regard,
the Borrower shall:
(i) not become involved in the day-to-day
management of any other Person;
(ii) not permit any Affiliate to become involved in
the day-to-day management of the Borrower except to the extent
provided in the Warehouse Facility Documents;
(iii) not engage in transactions with any other
Person other than those activities described herein and
matters necessarily incident thereto;
(iv) maintain separate corporate records and books of
account in a separate business office from any other Person;
(v) the financial statements and books and records of
the Borrower and of TWRI reflect the separate existence of the
Borrower;
(vi) maintain its assets separately from the assets
of any other Person (including through the maintenance of a
separate bank account);
(vii) maintain separate financial statements, books
and records from any other Person;
(viii) not guarantee any other Person's obligations
or advance funds to, or accept funds from, any other Person
for the payment of expenses or otherwise permit any Affiliate
to guarantee any of the Borrower's obligations;
(ix) conduct all business correspondence of the
Borrower and other communications in the Borrower's own name;
(x) not act as an agent of any other Person in any
capacity except pursuant to contractual documents indicating
such capacity and only in respect of transactions described
herein and matters necessarily incident thereto;
(xi) not fail to hold appropriate meetings of the
Board of Directors at least once per annum and otherwise as
necessary to authorize all corporate action;
(xii) not fail to hold meetings of the stockholders
at least one time per annum;
(xiii) not form, or cause to be formed, any
subsidiaries;
(xiv) not act as an agent of an Affiliate nor permit
any Affiliate to act as its agent except to the limited extent
permitted under the Warehouse Facility Documents;
(xv) maintain a separate office from each Affiliate,
which office may be on premises owned or leased by an
Affiliate provided that such arrangement is set forth; and
(xvi) not engage in intercorporate transactions
except to the extent permitted under the Warehouse Facility
Documents or as contemplated in its certificate of
incorporation, including ordinary course of business
parent-subsidiary transactions not inconsistent with any
specific provision of this Agreement including this Section
8(a).
(b) The Borrower's certificate of incorporation limits the
Borrower's activities to (i) the purchasing and lending against interests in
pools of Receivables, (ii) issuing securities secured by such obligations and
(iii) any activities incidental to the foregoing;
(c) The Borrower will 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 Agreement, the
Notes or any of the Receivables;
(d) The Borrower shall at all times observe and comply in all
material respects with (i) all laws applicable to it, (ii) all requirements of
law in the declaration and payment of dividends on its capital stock, and (iii)
all requisite and appropriate corporate and other formalities (including,
without limitation, meetings of the Borrower's board of directors and, if
required by law, its charter or otherwise, meetings and votes of the
shareholders of the Borrower to authorize corporate action) in the management of
its business and affairs and the conduct of the transactions contemplated
hereby;
(e) The Borrower shall not issue or register the transfer of
any of its capital stock to any Person other than TWRI or any of its Affiliates;
(f) The Borrower shall not (i) consolidate or merge with or
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any other Person or (ii) commingle its assets
with those of any other Person;
(g) The Borrower will, at all times, (i) maintain minutes of
the meetings and other proceedings of its shareholders and board of directors;
(ii) continuously maintain the resolutions, agreements and other instruments
underlying the transactions contemplated hereby and by the Warehouse Facility
Documents as official records of the Borrower; (iii) act solely in its corporate
name and through its duly authorized officers or agents to maintain an
arm's-length relationship with its Affiliates and (iv) pay all of its operating
expenses and liabilities from its own funds;
(h) The Borrower shall conduct its business solely in its own
name so as to not mislead others as to the identity of the corporation with
which those others are concerned, and particularly will use its best efforts to
avoid the appearance of conducting business on behalf of any of its Affiliates
or that the assets of the Borrower are available to pay the creditors of any of
its Affiliates;
(i) The Borrower will not: (a) engage in any business or
activity other than in connection with, or relating to the ownership of, the
Receivables and the interests in the Vacation Credits, the issuance of the
Notes, and the specific transactions contemplated hereby; (b) become liable for,
issue, incur, assume, or allow to remain outstanding any indebtedness, or
guaranty any indebtedness of any Person, other than the Notes, except as
contemplated Warehouse Facility Documents; and (c) seek dissolution or
liquidation in whole or in part or reorganization of its business or affairs;
(j) At any time and from time to time, upon the written
request of the Trustee (it being acknowledged that the Trustee shall have no
obligation to so request) or the Lender, and at the sole expense of the
Borrower, the Borrower will promptly and duly complete and deliver such further
instruments and documents and take such further actions as the Trustee or the
Lender may reasonably request (it being acknowledged that the Trustee shall have
no obligation to so request) for the purpose of obtaining or preserving the full
benefits to the Trustee on behalf of the Noteholders under the Indenture, as
supplemented from time to time, and of the rights and powers therein granted to
the Trustee on behalf of the Noteholders, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the security interests
created thereby. The Borrower also hereby authorizes the Trustee or the Lender
to file any such financing or continuation statement without the signature of
the Borrower to the extent permitted by applicable law. The Trustee shall have
no obligation to determine whether or not financing or continuation statements
need be filed or where such financing or continuation statements, if any, need
to be filed. A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any jurisdiction;
(k) The Borrower will not, nor will it permit or allow others
to, create, incur or permit to exist any lien, security interest or claim on or
to the related Assets, other than the security interests created by the
Indenture. The Borrower will defend the Trust Estate against, and will take such
other action as is necessary to remove, any lien, security interest or claim on
or to the related Assets, other than the security interests created by the
Indenture, and the Borrower will defend the right, title and interest of the
Trustee on behalf of the Noteholders in and to any of the related Assets against
the claims and demands of all persons whomsoever;
(l) The Borrower will not, nor will it permit or allow others
to, amend, modify, terminate or waive any provision of any Receivable in any
manner which could reasonably be expected to materially adversely affect the
value of the related Assets;
(m) The Borrower will furnish to the Trustee from time to time
statements and schedules further identifying and describing the related Assets
and such other reports in connection with the related Assets as the Trustee or
the Lender may reasonably request (the Trustee not being obligated to so
request), all in reasonable detail;
(n) The Borrower will notify the Trustee and the Lender
promptly, in reasonable detail, (i) of any lien or security interest (other than
security interests created thereby) on, or claim asserted against, any of the
related Assets, or (ii) of the occurrence of any other event which could
reasonably be expected to have a material adverse effect on the aggregate market
value of the related Assets or on the security interests, created under the
Indenture;
(o) The Borrower will not change the location of its chief
executive office/chief place of business or remove its books and records from
the location specified in the first paragraph hereof or change its name,
identity or corporate structure to such an extent that any financing statement
filed by the Borrower or the Trustee in connection with this Agreement would
become seriously misleading, unless it shall have given the Trustee and the
Lender at least 60 days prior written notice thereof;
(p) The Borrower shall at any reasonable time and from time to
time upon reasonable notice to the Borrower, permit the Trustee, the Lender or
any agent or representative thereof, to examine and make copies and abstracts
from the records and books of account of, and visit the properties of, the
Borrower and to discuss the affairs, finances, accounts and prospects of the
Borrower with any of its officers and directors and the Borrower's independent
accountants; once a year, or at anytime there exists an Event of Default, upon
reasonable notice to the Borrower, permit the Trustee, the Lender or any agent
or representative thereof, to examine and audit the books and records of the
Borrower (including, without limitation, any licenses necessary for the conduct
of its business) which examination and audit shall be at the expense of the
Borrower;
(q) The Borrower shall permit the Trustee or the Lender, at
such entity's sole discretion, to conduct, or may permit an agent of such entity
to conduct a due diligence review of any Receivable Documents relating to the
Receivables being pledged hereunder, either before or after the making of the
related Advance (the Trustee shall not be obligated to review);
(r) The Borrower shall not, without the prior written consent
of the Trustee or the Lender, change, amend, modify or supplement any of the
following: (i) its certificate of incorporation; (ii) by-laws; or (iii) its
shareholders agreements, which consent shall not be unreasonably withheld so
long as such change, amendment, modification or supplement does not adversely
affect the rights of the Lender, as Noteholder hereunder or in, to and under the
related Assets on behalf of the Lender, as Noteholder, including, without
limitation, the priority of the Trustee's security interest in the related
Assets on behalf of the Lender, as Noteholder;
(s) The Borrower shall pay its own expenses and shall pay (i)
all reasonable legal costs, incurred under or in the implementation of this
Agreement, (ii) any third party costs incurred under or in the implementation of
this Agreement, and (iii) after the occurrence of an Event of Default, all costs
and expenses (including attorneys' fees and costs of settlement) incurred by the
Lender in enforcing any obligations of or in collecting any payments due from
the Borrower hereunder or under the Notes by reason of such Event of Default.
Attorneys' fees, expenses and disbursements incurred in enforcing, or on appeal
from, a judgment pursuant hereto shall be recoverable separately from and in
addition to any other amount included in such judgment, and this clause is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into such judgment;
(t) To the extent that a Rating Agency requires that the
Borrower have more than one independent director, the Borrower shall amend its
organizational documents to comply with such Rating Agency's request;
(u) If an Event of Default has occurred and is continuing, the
Borrower shall not declare a dividend or make any distributions on its capital
stock; and
(v) Maintenance of Borrowing Base. Upon notice from the
Trustee, the Master Servicer or the Noteholders under the Indenture or from the
Lender, or actual knowledge of a Borrowing Base Deficiency, the Borrower shall
no later than two Business Days after such notice or knowledge of such Borrowing
Base Deficiency, either prepay principal on the Notes in whole or in part, or
Grant additional Eligible Receivables to the Trustee on behalf of the
Noteholders, such that after giving effect to such prepayment or Grant, a
Borrowing Base Deficiency will not exist.
SECTION 9. CERTAIN COVENANTS OF TWRI.
TWRI covenants and agrees that so long as any Advances shall
remain unpaid:
Section 9.1. Existence. TWRI will take and fulfill, or cause
to be taken and fulfilled, all actions and conditions necessary to preserve and
keep in full force and effect its existence, rights and privileges as a
corporation and will not liquidate or dissolve, and it will take and fulfill, or
cause to be taken and fulfilled, all actions and conditions necessary to
qualify, and to preserve and keep in full force and effect its qualification, to
do business in each jurisdiction in which the conduct of its business or the
ownership or leasing of its properties requires such qualification.
Section 9.2. Compliance with Law, etc. TWRI will not (a)
violate any laws, ordinances, governmental rules or regulations to which it is
or may become subject or (b) fail to obtain or maintain any patents, trademarks,
service marks, trade names, copyrights, licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Vacation Credits
or to the conduct of its business.
Section 9.3. Payment of Taxes and Claims. TWRI will pay and
discharge promptly, as and when due, all taxes, assessments and governmental
charges and levies imposed upon it, its income or profits or any of its
properties; provided, however, that the foregoing need not be paid while the
same is being contested in good faith by appropriate proceedings diligently
conducted so long as:
(a) adequate reserves shall have been established in
accordance with GAAP with respect thereto; and
(b) the right of TWRI, as the case may be, to use the
particular property shall not be materially and adversely affected thereby.
Section 9.4. Inspection. TWRI will permit, once a year, or at
anytime there exists an Event of Default, upon reasonable notice to it, the
Trustee, the Lender, or any representative or agent, (a) to examine all books of
account, records, reports and other papers of TWRI relevant to its role as
originator of the Receivable (including the Receivable Files), (b) to make
copies and take extracts from any thereof, (c) to discuss the affairs, finances
and accounts of TWRI with its respective officers and independent certified
public accountants (and by this provision TWRI hereby authorizes said
accountants to discuss with the Lender the finances and accounts of TWRI), and
(d) to visit and inspect, at reasonable times during normal business hours, the
properties of TWRI. It is understood and agreed by the parties hereto that all
reasonable expenses in connection with any such inspection or discussion
incurred by the Lender or TWRI, any officers and employees thereof and the
independent certified public accountants therefor shall be expenses payable by
TWRI.
Section 9.5. Consolidation and Merger. TWRI shall not merge or
consolidate with any other Person.
Section 9.6. Control. So long as any of the Notes remains
Outstanding, TWRI will not sell, pledge or otherwise transfer any of the
capital stock of the Borrower held by TWRI.
Section 9.7. Tax Returns. (a) At all times, so long as any of
the Notes or the other obligations secured by the Indenture remain outstanding,
TWRI and the Borrower shall be members of the same affiliated group within the
meaning of Section 1504 of the Code (the "TWRI Group") and shall join in the
filing of a consolidated return for federal income tax purposes and, to the
extent permitted by law, in the filing of consolidated or combined returns for
state, local and foreign tax purposes.
(a) (b) TWRI shall promptly pay and discharge, or cause the
payment and discharge of, all the TWRI Group, or federal income taxes (and all
other material taxes) when due and payable by TWRI, the Borrower, except (i)
such as may be paid thereafter without penalty or (ii) such as may be contested
in good faith by appropriate proceedings and for which an adequate reserve has
been established and is maintained in accordance with GAAP. TWRI shall promptly
notify the Borrower, the Trustee and the Noteholders of any material challenge,
contest or proceeding pending by or against TWRI or TWRI Group before any taxing
authority.
Section 9.8. Protection of Right, Title and Interest.
(a) TWRI shall deliver (or cause to be delivered) to the
Borrower and the Trustee file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing. In
the event that TWRI fails to perform its obligations under this subsection, the
Borrower or the Trustee may do so, on TWRI's behalf, at the expense of TWRI.
TWRI hereby grants the Borrower and the Trustee a power of attorney to
effectuate the provisions of the preceding sentence.
(b) TWRI shall not change its name identity, or corporate
structure in any manner that would, could, or might make any UCC financing
statement or continuation statement filed by TWRI in accordance with paragraph
(a) above seriously misleading within the meaning of ss. 9-402(7) of the UCC,
unless it shall have given the Borrower and the Trustee at least five days'
prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed UCC financing statements or continuation
statements.
(c) TWRI shall give the Borrower and the Trustee at least 60
days' prior written notice of any relocation of its principal place of business
or chief 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 UCC financing or continuation statement or of any new UCC
financing statement and shall promptly file any such amendment. TWRI shall at
all times maintain each office from which it shall service the Receivables and
its principal executive office, within the United States of America. TWRI shall
pay all filing fees or taxes payable in respect of any UCC financing or
continuation statements required to be filed pursuant to this Section 9.8(c).
(d) TWRI shall deliver to the Borrower and the Trustee
promptly after the execution and delivery of each amendment hereto, an Opinion
of Counsel either (i) stating that, in the opinion of such counsel, all UCC
financing statements and continuation statements necessary to preserve and
protect fully the interest of the Borrower and the Trustee in the Trust Estate
have been filed, or (ii) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest.
(e) Other Liens or Interests. Except for the conveyances under
the Indenture, TWRI will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on the Trust
Estate or any interest therein, and TWRI shall defend the right, title, and
interest of the Borrower and the Trustee in, to and under the Trust Estate
against all claims of third parties claiming through or under TWRI; provided
however, that TWRI's obligations under this Section 9.8 shall terminate upon the
repayment in full of the Note and the expiration of any applicable preference
period.
Section 9.9. Further Assurances. TWRI will promptly execute
and deliver all further instruments and documents and take all further action
that may be necessary in order to give effect to the provisions of the Warehouse
Facility Documents and the transactions contemplated hereby.
Section 9.10. Independence. Until 367 days have elapsed
following payment and satisfaction of all obligations of the Borrower hereunder
and in respect of the Advances, TWRI shall be required to (and shall assure that
each other Affiliate of TWRI shall) observe the applicable legal requirements
for the recognition of the Borrower as a legal entity separate and apart from
TWRI and each other Affiliate of TWRI, including, without limitation, assuring
that each of the following is complied with:
(a) TWRI and each other Affiliate of TWRI shall maintain
separate records and books of account (each of which shall be sufficiently full
and complete to permit a determination of the assets and liabilities of TWRI or
such Affiliate, as the case may be, separate and apart from those of the
Borrower and to permit a determination of the obligees thereon and the time for
performance on each of the obligations of TWRI or such Affiliate, as the case
may be, separate and apart from those of the Borrower) from those of the
Borrower;
(b) neither TWRI nor any of its other Affiliates shall
commingle any of its assets or funds with those of the Borrower;
(c) the board of directors of TWRI shall not dictate decisions
with respect to the Borrower's business and daily operations, and TWRI shall
maintain its own corporate formalities and shall otherwise respect the separate
corporate identity of the Borrower;
(d) other than the transactions contemplated by the Warehouse
Facility Documents, neither TWRI nor any of its other Affiliates shall enter
into any transactions with the Borrower;
(e) neither TWRI nor any of its other Affiliates shall accept
appointment as, or act as, an agent of the Borrower except, to the extent TWRI
performs certain servicing and collection functions pursuant to the Indenture;
(f) neither TWRI nor any of its other Affiliates shall advance
funds to the Borrower (except for the making of capital contributions); and
neither TWRI nor any of its other Affiliates will otherwise supply funds to, or
guarantee any obligation of, the Borrower;
(g) neither TWRI nor any of its other Affiliates shall
guarantee, or otherwise become liable with respect to, any obligation of the
Borrower;
(h) TWRI and each of its other Affiliates shall at all times
hold itself out to the public under its respective name as a legal entity
separate and distinct from the Borrower; and
(i) all financial reports prepared by TWRI and each of its
other Affiliates shall comply with GAAP.
Section 9.11. Other Agreements and Parties. TWRI will comply
with all terms of the Warehouse Facility Documents to which it is a party. TWRI
will not (a) except as otherwise expressly set forth herein and in the
Indenture, agree to any amendment, supplement or modification to or waiver of
the terms of the Warehouse Facility Documents to which it is a party without the
consent of the Lender, or (b) consent to the appointment of any Subservicer,
without the consent of the Lender, such consent not to be unreasonably withheld.
Section 9.12. Insurance Coverage. TWRI will maintain insurance
coverage, for itself and its subsidiaries, that encompasses employee dishonesty,
forgery or alteration, theft, disappearance and destruction, robbery and safe
burglary, property (other than money and securities), and computer fraud in an
aggregate amount of at least $1,000,000.
Section 9.13.. Financial Covenants.
(a) Minimum Tangible Net Worth. TWRI shall maintain a minimum
Tangible Net Worth equal to or greater than the sum of (A) $113,000,000, plus
(B) fifty percent (50%) of TWRI's Net Income (without regard to net losses)
after December 31, 1998, plus (C) eighty percent (80%) of New Equity raised by
TWRI.
(b) Maximum Leverage Ratio. The Borrower shall maintain
a Maximum Leverage Ratio not to exceed 2.00 to 1.00.
Section 9.14. Reserved.
Section 9.15. Interest Rate Protection. If on any date of
determination, (a) the weighted average Receivable Coupon Rate of the Trust
Estate Receivables is less than (b) the Notes Interest Rate plus 6%, TWRI shall
purchase interest rate caps satisfactory to the Lender. The proceeds of such
interest rate caps shall be pledged to the Borrower. TWRI shall remain liable
for any costs associated with such interest rate caps.
Section 9.16. Break-up Fee. TWRI shall pay the Lender
the Break-up Fee pursuant to the terms and conditions of the Engagement Letter.
Section 9.17. Reserved.
Section 9.18. Worldmark. (a) TWRI will not consent to
any request from Worldmark to allow Worldmark to encumber, pledge or
hypothecate any Resort property without the written consent of the Lender.
(a)(b) TWRI will continue to manage Worldmark in accordance
with the management agreement between TWRI and Worldmark, as such agreement may
be amended from time to time with the written consent of the Lender as may be
amended from time to time on account of (i) a change in the agreement made in
order to keep TWRI or Worldmark in compliance with federal, state or local laws,
rules and regulations, or (ii) as such agreement may be amended with the written
consent of the Lender.
SECTION 10. INFORMATION TO BE FURNISHED TO LENDER.
Section 10.1. Information to be Furnished by the Borrower
or TWRI.
(a) Financial Statements. The Borrower and TWRI will each
deliver or cause to be delivered to the Lender (i) no later than forty-five (45)
days following the end of each quarter (other than the 4th quarter), its
quarterly consolidated financial statements, (ii) no later than ninety (90) days
following the end of each fiscal year, its audited annual consolidated financial
statements prepared by KPMG LLP or another nationally recognized accounting firm
approved by the Lender, reflecting material inter-company adjustments, all of
which shall conform with GAAP.
(b) TWRI Officer's Certificate. Concurrently with the delivery
of the reports required in Section 10.1(a), TWRI shall provide the Lender with
an Officer's Certificate which shall (i) indicate TWRI's Tangible Net Worth at
the end of such quarter, (ii) certify that TWRI is in compliance with the
financial covenants contained in Section 9.13 hereof, together with details of
all calculations used to determine such compliance, (iii) certify that no Events
of Default have occurred, or if an Event of Default has occurred, the status
thereof, and (iv) that it is in compliance with each of the Warehouse Facility
Documents to which it is a party.
(c) Borrower Officer's Certificate. Concurrently with the
delivery of the reports required in Section 10.1(a), the Borrower shall provide
the Lender with an Officer's Certificate which shall (i) certify that no Events
of Default have occurred, or if an Event of Default has occurred, the status
thereof, and (ii) that it is in compliance with each of the Warehouse Facility
Documents to which it is a party.
(d) Event of Default Officer's Certificate. In the event that
any Officer of TWRI or the Borrower shall have obtained knowledge of any Default
or Event of Default, TWRI or Borrower, as the case may be, shall promptly (and
in any event within five (5) days) deliver an Officer's Certificate to the
Lender specifying the nature and period of existence thereof, what action the
Borrower or TWRI has taken or is taking or proposes to take with respect
thereto, and an estimate of the time necessary to cure such condition or event.
Nothing in this Section 10.1(d) or in any such Officer's Certificate shall
affect the length of the cure periods set forth in the Indenture.
(e) Receivables Data. On each Determination Date or at the
request by the Lender, TWRI or the Borrower shall deliver such other data,
filings and information in electronic format (including, but not limited to
cumulative data with respect to the Receivables regarding delinquencies,
prepayments, any repurchases and/or substitutions of Receivables by TWRI or the
Borrower) as the Lender may require to verify the information contained in the
related Servicer Report or to determine whether a Borrowing Base Deficiency
exists or such information the Lender may from time to time reasonably request.
(f) Worldmark Financial Statements. Within one hundred twenty
(120) days of the end of Worldmark's fiscal year, TWRI or the Borrower shall
deliver the audited annual consolidated financial statements of Worldmark and
the Annual Report required to be delivered to holders of Vacation Credits
pursuant to Section 7.2(c) of the by-laws of Worldmark.
(g) Vacation Credits Data. Within forty-five (45) days of the
end of each quarter, TWRI shall deliver any audit reports prepared by third
parties relating to TWRI and Worldmark (including but not limited to reports on
the number of Vacation Credits sold and remaining in inventory).
(h) Public Reports. TWRI shall promptly provide the Lender
with copies of all public announcements and public filings relating to TWRI.
SECTION 11. DEFAULTS, REMEDIES AND TERMINATION.
Section 11.1. Events of Default. Events of Default and
Remedies therefor are set forth in Sections 6.1, 6.2 and 6.3 of
the Indenture.
Section 11.2. Termination of Funding Obligation. If an
Event of Default has occurred and is continuing, the Lender shall have no
obligation to make Advances hereunder.
SECTION 12. INTERPRETATION OF AGREEMENT.
Section 12.1. Definitions. Capitalized terms used herein but
not defined shall have the meanings set forth in "Trendwest Warehouse Facility
Definitions" attached hereto as Annex A.
Section 12.2. Accounting Terms. All accounting terms used
herein that are not otherwise expressly defined shall have the respective
meanings given to them in accordance with GAAP at the particular time.
Section 12.3. Governing Law. THIS AGREEMENT AND THE NOTES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF
NEW YORK.
Section 12.4. Headings. The headings of the Sections and other
subsections of this Agreement have been inserted for convenience of reference
only and shall not affect the meaning of this Agreement.
Section 12.5. Independence of Covenants, etc. Each
representation, covenant or Event of Default herein shall be given independent
effect so that if any action or condition would violate any of such covenants,
would breach any of such representations or would constitute any of such Events
of Default, the fact that such action or condition would not violate or breach,
any other covenant or representation or constitute another Event of Default
shall not avoid the violation of such covenant or representation or the
occurrence of such Event of Default.
SECTION 13. MISCELLANEOUS.
Section 13.1. Notices. (a) All communications under this
Agreement shall be in writing and shall be delivered or mailed or sent by
facsimile transmission and confirmed in writing (i) if to the Lender, to
Prudential Securities Incorporated, Attention: Ken Leavy, One New York Plaza,
12th Floor, New York, New York 10292, facsimile number: 212-778-8876, with
copies to (A) Prudential Securities Incorporated-Credit Analysis Department,
Attention: James Maitland, One Seaport Plaza, 199 Water Street, 27th Fl., New
York, New York 10292, facsimile number: 212-214-7678, and (B) Prudential
Securities Incorporated, Attention: Andrew Yuder, One New York Plaza, 14th
Floor, New York, New York 10292, facsimile number: 212-778-7401 and (ii) if to
the Borrower or TWRI, at the address set forth in Section 2.2(b) or at such
other address or facsimile number as it shall have furnished in writing to the
Lender.
(a)(b) Any written communication so addressed and mailed by
certified or registered mail, return receipt requested, shall be deemed to have
been given when so mailed. All other written communications shall be deemed to
have been given upon receipt thereof.
Section 13.2. Survival. All representations, warranties and
covenants made by the Borrower herein or by the Borrower in any certificate or
other instrument delivered under or in connection with this Agreement shall be
considered to have been relied upon by the Lender and shall survive regardless
of any investigation made by the Lender or on the Lender's behalf.
Section 13.3. Successors and Assigns. This Agreement shall be
binding upon the parties hereof and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereof and their
respective successors and assigns permitted hereunder. Whether or not expressly
so stated and subject to the restrictions set forth herein, the provisions of
Sections 5 through 13 of this Agreement are intended to be for the Lender's
benefit and shall be enforceable by the Lender; and, provided further, that the
provisions of Sections 6.2 and 11.1 hereof shall also be for the benefit of, and
shall be enforceable by, any Person who shall no longer be a Lender hereunder
but who shall have incurred any expense or been subjected to any liability
referred to therein while, or on the basis of being, a Lender.
Section 13.4. Amendment and Waiver. (a) This Agreement and the
Notes may be amended or supplemented, and the observance of any term hereof or
thereof may be waived, with the written consent of the Borrower, TWRI and (i) on
or prior to the Initial Funding Date, the Lender, and (ii) after the Initial
Funding Date, the Lender (or, if multiple Lenders, Lenders with respect to at
least 66-2/3% in aggregate unpaid principal amount of the Advances; provided,
however, that no such amendment, supplement or waiver shall, without the written
consent of all Lenders, (a) change, with respect to the Advances, the amount or
time of any required prepayment or payment of principal or premium or the rate
or time of payment of interest, or change the funds in which any prepayment or
payment on the Advances is required to be made; (b) reduce the percentage of the
aggregate principal amount of Advances required for any amendment, consent or
waiver hereunder; (c) release any material Lien of the Trustee, held for the
benefit of Noteholders, on any of the Assets or affect the priority thereof or
(d) make changes which would have an adverse effect on the Lenders.
(b) Any amendment, supplement or waiver effected in
accordance with this Section 13.4 shall be binding upon the Lender, each
Assignee and the Borrower.
(c) The Borrower will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of the
Warehouse Facility Documents or the Notes unless the Lender (irrespective of the
amount of Advances made by it) shall be informed thereof by the Borrower and
shall be afforded the opportunity of considering the same and shall be supplied
by the Borrower with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any waiver
effected pursuant to the provisions of this Section 13.4 shall be delivered by
the Borrower to the Lender forthwith following the date on which the same shall
have been executed and delivered by the Lender of the requisite percentage of
Advances.
(d) Any amendment which adversely affects the Trustee's
rights, duties and immunities shall require the consent of the Trustee.
Section 13.5. Counterparts. This Agreement may be executed and
delivered simultaneously in two (2) or more counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute but one
and the same instrument.
Section 13.6. Reproduction of Documents. This Agreement and
all documents relating hereto (other than the Notes), including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Lender at the closing of the Lender's
making of Advances, and (c) financial statements, certificates and other
information heretofore or hereafter furnished to the Lender, may be reproduced
by the Lender by any photographic or other similar process, and the Lender may
destroy any original document so reproduced. The Borrower agrees and stipulates
that, to the extent permitted by applicable law and court or agency rules, any
such reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Lender in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall be admissible in evidence to the same
extent.
Section 13.7. Consent to Jurisdiction and Venue. The Borrower
and TWRI each hereby irrevocably (i) agrees that any suit, action or other legal
proceeding arising out of or relating to the Warehouse Facility Documents or any
Notes may be brought in a court of record in the State of New York or in the
courts of the United States of America located in such State, (ii) consents to
the jurisdiction of each such court in any such suit, action or proceeding, and
(iii) waives any objection which it may have to the laying of venue of any such
claim that any such suit, action or proceeding has been brought in an
inconvenient forum and covenants that it will not seek to challenge the
jurisdiction of any such court or seek to oust the jurisdiction of any such
court, whether on the basis of inconvenient forum or otherwise. The Borrower and
TWRI each irrevocably consent to the service of any and all process in any such
suit, action or proceeding by mail copies of such process to the Borrower at its
address for notices provided in Section 13.1 hereof. The Borrower and TWRI each
agree that a final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. All mailings under this Section 13.7 shall be by
registered or certified mail, return receipt requested. Nothing in this Section
13.7 shall affect the Lender's right to serve legal process in any other manner
permitted by law or affect the Lender's right to bring any suit, action or
proceeding against the Borrower or any of its properties in the courts of any
other jurisdiction.
Section 13.8. No Petition. The Lender and each Assignee hereby
covenant and agree that, until the expiration of the date which is one year and
one day after the payment in full of all Notes outstanding and issued pursuant
to the Indenture, it will not institute against the Borrower, or join in any
institution against the Borrower of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any applicable bankruptcy or similar law in connection with any obligations
relating to the Advances or the Warehouse Facility Documents.
Section 13.9. Acts of Lender. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Lender may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
the Lender in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments is or are delivered to the Borrower. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement if made in the manner provided
in this Section 13.9.
(a)(b) The fact and date of the execution by any person of any
such instrument or writing may be proved in any manner that the Borrower deems
sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Lender or any Assignee shall bind the
Lender and such Assignee in respect of anything done, omitted or suffered to be
done by the Borrower in reliance thereon, whether or not notation of such action
is made upon such Note.
Section 13.10. Confidentiality. All non-public information
relating to this Agreement, the Warehouse Facility Documents and the
transactions contemplated thereby will be kept confidential by TWRI, the
Borrower and the Lender, except to the extent disclosure of such information may
be required by law, rule or regulation applicable to such Person. The Lender
agrees to cause each assignee and Participant with which it is a party to agree
to keep such information confidential. The provisions of this Section 13.10
shall survive the termination of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the day and year first above written.
TW HOLDINGS II, INC.
By: ___________________________
Name:
Title:
TRENDWEST RESORTS, INC.
By: __________________________
Name:
Title:
PRUDENTIAL SECURITIES
CREDIT CORPORATION
By: _________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF BORROWING NOTICE
Prudential Securities Credit Corporation
One Seaport Plaza, 27th Floor
New York, New York 10292
Fax: (212) 214-7535
Attention: Robert Troiano
In accordance with Section 1.3 of the Credit Agreement, dated as of
April 15, 1999 (the "Credit Agreement"), by and among TW Holdings II, Inc. (the
"Borrower"), Trendwest Resorts, Inc., and Prudential Securities Credit
Corporation (the "Lender"), the undersigned, an authorized representative of the
Borrower gives notice to the Lender that the Borrower proposes to borrow, in
accordance and subject to the terms of the Credit Agreement, from the Lender
$[__] (the "Advance") on [DATE] (the "Proposed Funding Date"). All capitalized
terms used but not defined herein shall have the meanings given them in
"Trendwest Warehouse Facility Definitions" attached hereto as Annex A to the
Credit Agreement.
In connection with this Borrowing Notice and the requested Advance:
1. The Borrower represents that on the Proposed Funding Date, all
conditions precedent required in Sections 3 and 4 and elsewhere in the Credit
Agreement have been satisfied.
2. Pursuant to Section 1.3 of the Credit Agreement, the Borrower has
attached hereto the Schedule of Receivables containing the Required Information
in hard copy and in electronic format.
3. No Borrowing Base Deficiency exists.
4. The Advance should be wired to [WIRING INSTRUCTIONS].
TW HOLDINGS II, INC.
By: ____________________________
Name:
Title:
cc: Dan Lynch (PSCC - Fax: (212) 214-7533)
Peter Austin (PSI - Fax: (212) 778-7401)
Lina Hsu (PSI - Fax: (212) 778-3716)
<PAGE>
EXHIBIT B
TWRI CREDIT AND COLLECTION POLICIES
<PAGE>
EXHIBIT C
FORM OF INSTALLMENT SALE CONTRACT
TW HOLDINGS II, INC.,
as Borrower
TRENDWEST RESORTS, INC.,
as Master Servicer
SAGE SYSTEMS, INC.,
as Custodian
and
LASALLE NATIONAL BANK,
as Trustee
--------------
TRUST INDENTURE
--------------
Dated as of April 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION...............................................2
SECTION 1.1. General Definitions...........................................................................2
SECTION 1.2. Compliance Certificates and Opinions..........................................................2
SECTION 1.3. Form of Documents Delivered to Trustee........................................................3
SECTION 1.4. Acts of Noteholders, etc......................................................................4
SECTION 1.5. Notice to Noteholders; Waiver.................................................................5
SECTION 1.6. Effect of Headings and Table of Contents......................................................6
SECTION 1.7. Successors and Assigns........................................................................6
SECTION 1.8. GOVERNING LAW.................................................................................6
SECTION 1.9. Legal Holidays................................................................................6
SECTION 1.10. Execution in Counterparts.....................................................................6
SECTION 1.11. Inspection ...................................................................................7
SECTION 1.12. Survival of Representations and Warranties....................................................7
ARTICLE 2. THE NOTES ............................................................................................7
SECTION 2.1. General Provisions............................................................................7
SECTION 2.2. Execution, Authentication, Delivery,
and Dating.........................................................................8
SECTION 2.3. Transfer and Exchange.........................................................................9
SECTION 2.4. Mutilated, Destroyed, Lost and Stolen Notes..................................................10
SECTION 2.5. Payment of Interest and Principal; Rights Preserved..........................................11
SECTION 2.6. Persons Deemed Owners........................................................................12
SECTION 2.7. Cancellation.................................................................................12
SECTION 2.8. Noteholder Lists.............................................................................12
SECTION 2.9. Treasury Notes...............................................................................12
ARTICLE 3. ACCOUNTS; COLLECTION AND APPLICATION OF MONEYS; REPORTS..............................................13
SECTION 3.1. Trust Accounts; Investments by Trustee.......................................................13
SECTION 3.2. Establishment and Administration of the Collection Account...................................15
SECTION 3.3. Reserved. ..................................................................................15
SECTION 3.4. Distributions................................................................................16
SECTION 3.5. Certifications to Noteholders................................................................17
SECTION 3.6. Returned Payments............................................................................17
ARTICLE 4. THE TRUST ESTATE.....................................................................................17
SECTION 4.1. Acceptance by Trustee........................................................................17
SECTION 4.2. Subsequent Transfers.........................................................................18
SECTION 4.3. Conditions Precedent to All Transfers........................................................19
SECTION 4.4. Grant of Security Interest; Tax Treatment....................................................20
SECTION 4.5. Further Action Evidencing Assignments........................................................21
SECTION 4.6. Substitution of Receivables and Release of Liens.............................................21
SECTION 4.7. Appointment of Custodian; Delivery of
Receivable Documents; Verification................................................22
SECTION 4.8. Receipts. ..................................................................................23
SECTION 4.9 Duties of Custodian..........................................................................23
SECTION 4.10. Representations and Warranties of Custodian..................................................24
SECTION 4.11. Indemnification of Custodian.................................................................25
SECTION 4.12. Adverse Interests............................................................................25
SECTION 4.13. Termination of Custodian.....................................................................25
ARTICLE 5. SERVICING OF ASSETS..................................................................................26
SECTION 5.1. Appointment of Master Servicer...............................................................26
SECTION 5.2. Duties of Master Servicer; Subservicers......................................................27
SECTION 5.3. Collection Responsibilities; Receivable Modifications........................................31
SECTION 5.4. Maintenance of Insurance.....................................................................31
Section 5.5. Assumption and Substitution Agreements.......................................................32
SECTION 5.6. Realization Upon Defaulted Receivables.......................................................32
Section 5.7. Representations and Warranties as to the
Master Servicer...................................................................33
SECTION 5.8. Existence; Status as Master Servicer; Merger.................................................34
SECTION 5.9. Performance of Obligations...................................................................35
SECTION 5.10. Event of Master Servicer Termination.........................................................35
SECTION 5.11. Optional Purchase of Vacation Credits........................................................35
ARTICLE 6. EVENTS OF DEFAULT; REMEDIES..........................................................................36
SECTION 6.1. Events of Default............................................................................36
SECTION 6.2. Acceleration of Maturity; Rescission and Annulment...........................................38
SECTION 6.3. Remedies ..................................................................................39
SECTION 6.4. Trustee May File Proofs of Claim.............................................................40
SECTION 6.5. Trustee May Enforce Claims Without Possession of Notes.......................................41
SECTION 6.6. Application of Money Collected...............................................................42
SECTION 6.7. Limitation on Suits..........................................................................42
SECTION 6.8. Unconditional Right of Noteholders to Receive Principal and Interest.........................43
SECTION 6.9. Restoration of Rights and Remedies...........................................................43
SECTION 6.10. Rights and Remedies Cumulative...............................................................43
SECTION 6.11. Delay or Omission Not Waiver.................................................................43
SECTION 6.12. Control by Noteholders.......................................................................43
SECTION 6.13. Waiver of Events of Default..................................................................44
SECTION 6.14. Undertaking for Costs........................................................................44
SECTION 6.15. Waiver of Stay or Extension Laws.............................................................45
SECTION 6.16. Sale of Trust Estate.........................................................................45
ARTICLE 7. THE TRUSTEE..........................................................................................46
SECTION 7.1. Certain Duties...............................................................................46
SECTION 7.2. Notice of Events of Default..................................................................48
SECTION 7.3. Certain Matters Affecting the Trustee........................................................48
SECTION 7.4. Trustee Not Liable for Notes or Receivables..................................................49
SECTION 7.5. Trustee May Own Notes........................................................................49
SECTION 7.6. The Master Servicer to Pay Trustee's Fees and Expenses.......................................49
SECTION 7.7. Eligibility Requirements for Trustee.........................................................50
SECTION 7.8. Resignation or Removal of Trustee............................................................50
SECTION 7.9. Successor Trustee............................................................................51
SECTION 7.10. Merger or Consolidation of Trustee...........................................................52
SECTION 7.11. Appointment of Co-Trustee or Separate
Trustee...........................................................................53
SECTION 7.12.. Paying Agent and Note Registrar Rights.......................................................54
SECTION 7.13. No Obligation to make Advances...............................................................55
ARTICLE 8. COVENANTS ...........................................................................................55
SECTION 8.1. Payment of Principal and Interest............................................................55
SECTION 8.2. Maintenance of Office or Agency; Chief Executive Office......................................55
SECTION 8.3. Money for Payments to Noteholders to be Held in Trust........................................55
SECTION 8.4. Corporate Existence; Merger;
Consolidation, etc................................................................56
SECTION 8.5. Protection of Trust Estate; Further
Assurances........................................................................56
SECTION 8.6. Reserved. ..................................................................................57
SECTION 8.7. Additional Covenants.........................................................................57
SECTION 8.8. Taxes ..................................................................................58
ARTICLE 9. SUPPLEMENTAL INDENTURES..............................................................................58
SECTION 9.1. Supplemental Indentures......................................................................58
SECTION 9.2. Supplemental Indentures with Consent of Noteholders..........................................59
SECTION 9.3. Execution of Supplemental Indentures.........................................................60
SECTION 9.4. Effect of Supplemental Indentures............................................................60
SECTION 9.5. Reference in Notes to Supplemental
Indentures........................................................................61
ARTICLE 10. SATISFACTION AND DISCHARGE..........................................................................61
SECTION 10.1. Satisfaction and Discharge of Indenture......................................................61
SECTION 10.2. Application of Trust Money...................................................................61
SECTION 10.3. Trust Termination Date.......................................................................62
ARTICLE 11. REPRESENTATIONS AND WARRANTIES......................................................................62
SECTION 11.1. Representations and Warranties of the Borrower...............................................62
SECTION 11.2. Representations and Warranties as to Each Trust Estate Receivable............................65
ARTICLE 12. MISCELLANEOUS.......................................................................................65
SECTION 12.1. Indemnities of the Master Servicer...........................................................65
SECTION 12.2. Officer's Certificate and Opinion of Counsel
as to Conditions Precedent........................................................66
SECTION 12.3. Statements Required in Certificate or
Opinion...........................................................................66
SECTION 12.4. Notices ..................................................................................67
SECTION 12.5. No Proceedings...............................................................................68
[SIGNATURE PAGE FOLLOWS].........................................................................................68
</TABLE>
<PAGE>
EXHIBITS
EXHIBIT A Form of Collateral Assignment
EXHIBIT B Form of Variable Note
EXHIBIT C Form of Rule 144A Transferee Letter
EXHIBIT D Form of Investor Letter
EXHIBIT E Form of Servicer Report
EXHIBIT F Form of Request for Release
EXHIBIT G Form of Receipt
Schedule 1 List of Assets
Annex A Trendwest Warehouse Facility Definitions
<PAGE>
trust indenture
TRUST INDENTURE
This TRUST INDENTURE dated as of April 15, 1999 (the
"Indenture"), is by and among TW HOLDINGS II, INC., a Delaware corporation (the
"Borrower"), TRENDWEST RESORTS, INC., an Oregon corporation, as Master Servicer
(the "Master Servicer") and individually ("TWRI"), SAGE SYSTEMS, INC., as
Custodian (the "Custodian") and LASALLE NATIONAL BANK, as trustee (the
"Trustee").
RECITALS OF THE BORROWER
WHEREAS, the Borrower is a bankruptcy-remote corporation
formed for the sole purpose of acquiring from TWRI certain timeshare receivables
originated by TWRI and certain other rights and properties pertaining thereto;
WHEREAS, the Borrower has duly authorized the execution and
delivery of this Indenture to provide for the issuance of a class of variable
funding notes (the "Notes") which shall evidence Advances made from time to time
by Prudential Securities Credit Corporation (the "Lender") pursuant to the
Credit Agreement, dated April 15, 1999, by and among the Borrower, TWRI and the
Lender;
WHEREAS, the Notes shall be secured by the Assets;
WHEREAS, the Borrower intends that the Trustee, on behalf of
the Noteholders, will, from time to time, take assignment of Receivables and
related rights and benefits, including those under any collateral security
agreement, and guarantees from the Borrower simultaneously with the acquisition
of such Receivables by the Borrower from TWRI; and
NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:
For and in consideration of the mutual covenants set forth
herein, and for other valuable consideration, the receipt of which are hereby
acknowledged, it is mutually covenanted and agreed, for the benefit of all
parties hereto, as follows:
GRANTING CLAUSE
The Borrower hereby Grants to the Trustee for inclusion in the
Trust Estate on each Assignment Date, for the benefit and security of the
Noteholders and the Trustee, all of the Borrower's right, title and interest in
and to the following:
(i) all Assets specified in the related Collateral Assignment. The Trustee
acknowledges receipt of the related Trust Estate and declares that it
will hold or shall cause the related Custodian to hold such documents
and the other documents constituting a part of the related Receivable
Documents, for the benefit of the Noteholders;
(ii) the Trust Accounts and all monies, checks, securities, investments and
interests held in, credited to or evidencing such accounts;
(iii) all of the Borrower's right, title and interest in and to investments
made with proceeds of the property described in clauses (i) and (ii)
above; and
(iv) all distributions, revenues, products, substitutions, benefits, profits
and proceeds, in whatever form, of any of the foregoing.
Such Grant is made in trust to secure (i) the payment of all amounts due on the
Notes, (ii) the payment of all other sums payable under this Indenture with
respect to the Notes and (iii) compliance with the provisions of this Indenture
with respect to the Notes.
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 and to the end that the Trust
Estate and the interests of the Noteholders, the Trustee and the Borrower may be
adequately and effectively protected as hereinafter provided.
ARTICLE 1.
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 1.1. General Definitions.
In addition to the terms defined elsewhere in this Indenture,
certain capitalized terms shall have the meanings given them in "Trendwest
Warehouse Facility Definitions" attached hereto as Annex A.
SECTION 1.2. Compliance Certificates and Opinions.
Upon any written application or request by the Borrower to the
Trustee to take any action under any provision of this Indenture, other than any
request that (a) the Trustee authenticate the Notes specified in such request,
(b) the Trustee invest moneys in any of the Trust Accounts pursuant to the
written directions specified in such request, or (c) the Trustee pay moneys due
and payable to the Borrower hereunder to the Borrower's assignee specified in
such request, the Trustee shall require the Borrower to furnish to the Trustee
an Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and that the request otherwise is in accordance with the terms of the Indenture,
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such requested action as to which other evidence of satisfaction of the
conditions precedent thereto is specifically required by any provision of this
Indenture, no additional certificate or opinion need be furnished.
SECTION 1.3. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Borrower
delivered to the Trustee may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to the matters upon which
his certificate or opinion is based are erroneous. Any such officer's
certificate or opinion and any Opinion of Counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of, or representations
by, an officer or officers of the Borrower as to such factual matters unless
such officer or counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous. Any Opinion of Counsel may be based on the written
opinion of other counsel, in which event such Opinion of Counsel shall be
accompanied by a copy of such other counsel's opinion and shall include a
statement to the effect that such counsel believes that such counsel and the
Trustee may reasonably rely upon the opinion of such other counsel.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
Wherever in this Indenture, in connection with any application
or certificate or report to the Trustee, it is provided that the Borrower shall
deliver any document as a condition of the granting of such application, or as
evidence of compliance with any term hereof, it is intended that the truth and
accuracy, at the time of the granting of such application or at the effective
date of such certificate or report (as the case may be), of the facts and
opinions stated in such document shall in such case be conditions precedent to
the right of the Borrower to have such application granted or to the sufficiency
of such certificate or report. The foregoing shall not, however, be construed to
affect the Trustee's right to rely upon the truth and accuracy of any statement
or opinion contained in any such document as provided in Section 7.1(b).
Whenever in this Indenture it is provided that the absence of
the occurrence and continuation of a Default or Event of Default, or Event of
Master Servicer Termination is a condition precedent to the taking of any action
by the Trustee at the request or direction of the Borrower, then,
notwithstanding that the satisfaction of such condition is a condition precedent
to the Borrower's right to make such request or direction, the Trustee shall be
protected in acting in accordance with such request or direction if it does not
have knowledge of the occurrence and continuation of such Default or Event of
Default, or Event of Master Servicer Termination. For all purposes of this
Indenture, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default, or Event of Master Servicer Termination nor shall the Trustee
have any duty to monitor or investigate to determine whether a default has
occurred (other than an Event of Default of the kind described in Section
6.1(a)), or Event of Master Servicer Termination unless a Responsible Officer of
the Trustee shall have actual knowledge thereof or shall have been notified in
writing thereof by the Borrower, the Master Servicer, or any Noteholder.
SECTION 1.4. Acts of Noteholders, etc.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders shall be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by Noteholders representing 66-2/3% of the
then Outstanding Principal Amount of Outstanding Notes; 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 Borrower. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 7.1)
conclusive in favor of the Trustee and the Borrower, if made in the manner
provided in this Section 1.4.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the holder of any Note shall bind every future
holder of the same Note and the holder of every Note issued upon the
registration of transfer thereof or in exchange therefore or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Borrower in reliance thereon, whether or not notation of such action is made
upon such Note.
(d) By accepting the Notes issued pursuant to this Indenture,
each Noteholder irrevocably appoints the Trustee hereunder as the special
attorney-in-fact for such Noteholder vested with full power on behalf of such
Noteholder to effect and enforce the rights of such Noteholder for the benefit
of such Noteholder; provided that nothing contained in this Section 1.4(d) shall
be deemed to confer upon the Trustee any duty or power to vote on behalf of the
Noteholders with respect to any matter on which the Noteholders have a right to
vote pursuant to the terms of this Indenture.
SECTION 1.5. Notice to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of
any event, or the mailing of any report to Noteholders, such notice or report
shall be sufficiently given (unless otherwise herein expressly provided) if in
writing and mailed, first-class postage prepaid or certified mail return receipt
requested, or sent by private courier or confirmed telecopy to each Noteholder
affected by such event or to whom such report is required to be mailed, at its
address as it appears in the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice or
the mailing of such report. In any case where a notice or report to Noteholders
is mailed, neither the failure to mail such notice or report, nor any defect in
any notice or report so mailed, to any particular Noteholder shall affect the
sufficiency of such notice or report with respect to other Noteholders. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the 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.
(b) In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable to mail or
send notice to Noteholders, in accordance with Section 1.5(a), of any event or
any report to Noteholders when such notice or report is required to be delivered
pursuant to any provision of this Indenture, then such notification or delivery
as shall be made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder.
SECTION 1.6. Effect of Headings and Table of Contents.
The Article and Section headings herein and in the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 1.7. Successors and Assigns.
All covenants and agreements in this Indenture by each of the
Borrower, the Master Servicer or the Trustee shall bind its respective
successors and permitted assigns, whether so expressed or not.
SECTION 1.8. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. UNLESS MADE
APPLICABLE IN A SUPPLEMENT HERETO, THIS INDENTURE IS NOT SUBJECT TO THE TRUST
INDENTURE ACT OF 1939, AS AMENDED, AND SHALL NOT BE GOVERNED THEREBY AND
CONSTRUED IN ACCORDANCE THEREWITH.
SECTION 1.9. Legal Holidays.
In any case where any Payment Date or any other date on which
principal of or interest on any Note is proposed to be paid shall not be a
Business Day, then (notwithstanding any other provision of this Indenture or of
the Notes) such payment need not be made on such date, but shall be made on the
next succeeding Business Day with the same force and effect as if made on such
Payment Date, or other date on which principal of or interest on any Note is
proposed to be paid, provided that no interest shall accrue for the period from
and after such Payment Date, or any other date on which principal of or interest
on any Note is proposed to be paid, as the case may be, until such next
succeeding Business Day.
SECTION 1.10. Execution in 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 1.11. Inspection.
The Borrower agrees that, on reasonable prior notice, it will
permit the representatives of the Trustee or any Noteholder holding Notes
evidencing at least 25% of the Outstanding Principal Amount of the Notes, during
the Borrower's normal business hours, to examine all of the books of account,
records, reports and other papers of the Borrower, to make copies thereof and
extracts therefrom, and to discuss its affairs, finances and accounts with its
officers, employees and independent accountants (and by this provision the
Borrower hereby authorizes its accountants to discuss with such representatives
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested for the purpose of reviewing or evaluating the
financial condition or affairs of the Borrower or the performance of and
compliance with the covenants and undertakings of the Borrower and the Master
Servicer in this Indenture, the Receivables Sale Agreement or any of the other
documents referred to herein or therein. Any expense incident to the exercise by
the Trustee at any time or any Noteholder during the continuance of any Default
or Event of Default, of any right under this Section 1.11 shall be borne by the
Borrower. Nothing contained herein shall be construed as a duty of the Trustee
to perform such inspection.
SECTION 1.12. Survival of Representations and Warranties.
The representations, warranties and certifications of the
Borrower made in this Indenture or in any certificate or other writing delivered
by the Borrower pursuant hereto shall survive the authentication and delivery of
the Notes hereunder.
ARTICLE 2.
THE NOTES
SECTION 2.1. General Provisions.
(a) Maximum Outstanding Principal Balance of Notes. The
aggregate Outstanding Principal Amount of the Notes that may be authenticated
and delivered under this Indenture shall not exceed $75,000,000.
(b) Denominations. The Notes may be issued in minimum
denominations of $500,000 and any integral multiple of $1,000 in excess thereof;
provided that the foregoing shall not restrict or prevent the transfer in
accordance with Section 2.3 of this Indenture of any Notes having a remaining
Outstanding Principal Amount of other than an integral multiple of $1,000, or
the issuance of a single Note with a denomination less than $500,000.
(c) Principal Payments. For each Payment Date, the Noteholders
shall be entitled to the Note Principal Payment Amount (the "Principal
Payments"). Principal Payments on the Notes will be made in accordance with
Sections 3.4 or 6.6, as applicable.
(d) Interest Payments. For each Payment Date, the Noteholders
shall be entitled to the Note Interest Payment Amount (the "Interest Payments")
that has accrued on the Notes during the previous Due Period, plus unpaid
interest from prior Due Periods, at the Note Interest Rate. Interest Payments
will be made in accordance with Sections 3.4 and 6.6, as applicable.
(e) Outstanding Principal Amount. The Outstanding Principal
Amount of the Notes will, at all times, be equal to the Outstanding amount of
Advances made pursuant to the Credit Agreement.
(f) Form of Notes. The Notes shall be in substantially the
form attached hereto as Exhibit B.
SECTION 2.2. Execution, Authentication, Delivery, and Dating.
(a) The Notes shall be manually executed on behalf of the
Borrower by its Chairman, Vice Chairman, President, or any Vice President.
(b) Any Note bearing the signature of an individual who was at
the time of execution thereof a proper officer of the Borrower shall bind the
Borrower, notwithstanding that such individual ceases to hold such office prior
to the authentication and delivery of such Note or did not hold such office at
the date of such Note.
(c) 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 by manual signature, and such certificate upon
any Note shall be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder. Each Note shall be dated the
date of its authentication.
(d) The Notes may from time to time be executed by the
Borrower and delivered to the Trustee for authentication together with a
Borrower Order to the Trustee directing the authentication and delivery of such
Notes and thereupon the same shall be authenticated and delivered by the Trustee
in accordance with such Borrower Order.
SECTION 2.3. Transfer and Exchange.
(a) The Borrower shall cause to be kept at the Corporate Trust
Office a register (the "Note Register") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Borrower shall provide for the
registration of Notes and of transfers of Notes. The Trustee is hereby appointed
"Note Registrar" for the purpose of registering Notes and transfers of Notes as
herein provided.
No transfer of any Note may be made unless that transfer is
made pursuant to an effective registration statement under the Securities Act
and an effective registration or a qualification under applicable state
securities laws, or is made in a transaction that does not require such
registration or qualification because the transfer satisfies one of the
following: (i) such transfer is in compliance with Rule 144A under the
Securities Act, to a person who the transferor reasonably believes is a
Qualified Institutional Buyer (as defined in Rule 144A) that is purchasing for
its own account or for the account of a Qualified Institutional Buyer and to
whom notice is given that such transfer is being made in reliance upon Rule 144A
under the Securities Act as certified by such transferee in a letter delivered
to the Note Registrar in the form of Exhibit C hereto; (ii) after the
appropriate holding period, such transfer is pursuant to an exemption from
registration under the Securities Act provided by Rule 144 under the Securities
Act; (iii) such transfer is to a transferee who is an accredited investor in a
transaction exempt from the registration requirements of the Securities Act, in
each case in accordance with any applicable securities laws of any State of the
United States or (iv) such transfer is otherwise exempt from the registration
requirements of the Securities Act. In order to assure compliance with such
laws, the Noteholder's prospective transferee referred to in the preceding
clauses (iii) or (iv) must deliver an investment letter certifying to the
Borrower and the Trustee as to the facts surrounding such transfer in the form
of Exhibit D hereto. Except in the case of a transfer of Notes to a transferee
referred to in the preceding clause (i) or, in general, a transfer that is to be
made after two years from the Issuance Date, the Trustee shall require an
opinion of counsel satisfactory to it to the effect that such transfer may be
made pursuant to an exemption from the Securities Act without such registration
(which opinion of counsel shall not be an expense of the Trustee, the Master
Servicer or the Borrower). None of the Borrower, the Master Servicer, the Note
Registrar or the Trustee is obligated to register or qualify the Notes under the
Securities Act or any other securities law or to take any action not otherwise
required under this Indenture to permit the transfer of any Note without
registration.
Neither the Trustee nor the Note Registrar shall effect the
registration of transfer of any Note, if after giving effect to such transfer,
the Notes would be held by more than ninety-eight Noteholders.
(b) Subject to Section 2.3(a), upon surrender for registration
of transfer of any Note at the office of the Trustee designated pursuant to
Section 8.2 for such purpose, the Borrower shall execute and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations and of a like
aggregate original principal amount.
(c) Every Note presented or surrendered for registration of
transfer or for exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Borrower and the Trustee duly
executed, by the holder thereof or his attorney duly authorized in writing.
(d) No service charge shall be made for any registration of
transfer or exchange of Notes, but the Borrower or the Trustee may require
payment by the transferor of a sum sufficient to cover any Tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes, other than exchanges pursuant to Section 9.5 not
involving any transfer.
(e) The Master Servicer agrees to cause the Borrower, and the
Borrower agrees, to provide such information as required under Rule 144A under
the Securities Act so as to allow resales of Notes to Qualified Institutional
Buyers in accordance herewith.
SECTION 2.4. Mutilated, Destroyed, Lost and Stolen Notes.
(a) If any mutilated Note is surrendered to the Trustee, the
Borrower shall execute and the Trustee shall authenticate and deliver in
exchange therefore a replacement Note of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
(b) If there shall be delivered to the Borrower and the
Trustee (i) evidence to their satisfaction of the destruction, loss or theft of
any Note and (ii) such security or indemnity as may be required by them to save
each of them and any agent of either of them harmless then, in the absence of
actual notice to the Borrower or the Trustee that such Note has been acquired by
a bona fide purchaser, the Borrower shall execute and upon its request the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Note, a replacement Note of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
(c) In case the final installment of principal on any such
mutilated, destroyed, lost or stolen Note has become or will at the next Payment
Date become due and payable, the Borrower in its discretion may, instead of
issuing a replacement Note, pay or cause the Trustee to pay such Note.
(d) Upon the issuance of any replacement Note under this
Section 2.4, the Borrower or the Trustee may require the payment by the
Noteholder of a sum sufficient to cover any Tax or other governmental charge
that may be imposed as a result of the issuance of such replacement Note.
(e) Every replacement Note issued pursuant to this Section 2.4
in lieu of any destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Borrower, 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.
(f) The provisions of this Section 2.4 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 2.5. Payment of Interest and Principal; Rights
Preserved.
(a) Any installment of interest or principal, payable on any
Note that is punctually paid or duly provided for by or on behalf of the
Borrower on the applicable Payment Date shall be paid to the Person in whose
name such Note was registered at the close of business on the Record Date for
such Payment Date by check mailed to the address specified in the Note Register,
or upon the request of a Holder by wire transfer of federal funds to the account
and number specified in the Note Register, in each case on such Record Date for
such Person (which shall be, as to each original purchaser of the Notes, the
account and number specified by such purchaser to the Trustee in writing, or, if
no such account or number is so specified, then by check mailed to such Person's
address as it appears in the Note Register on such Record Date).
(b) All reductions in the principal amount of a Note effected
by payments of installments of principal made on any Payment Date shall be
binding upon all Holders of such Note and of any Note issued upon the
registration of transfer thereof or in exchange therefore or in lieu thereof,
whether or not such payment is noted on such Note. All payments on the Notes
shall be paid without any requirement of presentment but each Holder of any Note
shall be deemed to agree, by its acceptance of the same, to surrender such Note
at the Corporate Trust Office against payment of the final installment of
principal of such Note.
SECTION 2.6. Persons Deemed Owners.
Prior to due presentment of a Note for registration of
transfer, the Borrower, the Trustee, and any agent of the Borrower or the
Trustee may treat the registered Noteholder as the owner of such Note for the
purpose of receiving payment of principal of and interest on such Note and for
all other purposes whatsoever, whether or not such Note be overdue, and neither
the Borrower, the Trustee, nor any agent of the Borrower or the Trustee shall be
affected by notice to the contrary.
SECTION 2.7. Cancellation.
All Notes surrendered for registration of transfer or exchange
or following final payment shall, if surrendered to any Person other than the
Trustee, be delivered to the Trustee and shall be promptly canceled by it. The
Borrower may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Borrower may have
acquired in any manner whatsoever, and all Notes so delivered 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, except as expressly
permitted by this Indenture. All canceled Notes held by the Trustee may be
disposed of in the normal course of its business or as directed by a Borrower
Order.
SECTION 2.8. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. In the event the Trustee no longer serves as the Note
Registrar, the Borrower (or any other obligor upon the Notes) shall furnish to
the Trustee at least 5 Business Days before each Payment Date (and in all events
in intervals of not more than 6 months) and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Noteholders.
SECTION 2.9. Treasury Notes.
In determining whether the Noteholders of the required
Outstanding Principal Amount of the Notes have concurred in any direction,
waiver or consent, Notes held or redeemed by the Borrower or any other obligor
upon the Notes or held by an Affiliate of the Borrower or such other obligor
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which a Responsible Officer of the
Trustee knows are so owned shall be so disregarded.
ARTICLE 3.
ACCOUNTS; COLLECTION AND
APPLICATION OF MONEYS; REPORTS
SECTION 3.1. Trust Accounts; Investments by Trustee.
(a) On or before the Issuance Date, the Trustee shall
establish in the name of the Trustee for the benefit of the Noteholders and the
Borrower to the extent of their interests therein as provided in this Indenture,
the Trust Accounts, which accounts shall be Eligible Bank Accounts.
Subject to the further provisions of this Section 3.1(a), the
Trustee shall, upon receipt or upon transfer from another account, as the case
may be, deposit into such accounts all amounts received by it which are required
to be deposited therein in accordance with the provisions of this Indenture. All
such amounts and all investments made with such amounts, including all income
and other gain from such investments, shall be held by the Trustee in such
accounts as part of the Trust Estate as herein provided, subject to withdrawal
by the Trustee in accordance with, and for the purposes specified in the
provisions of, this Indenture.
(b) The Trustee shall hold in trust but shall not be required
to deposit in any account specified pursuant to Section 3.1(a) any payment
received by it until such time as the Trustee shall have identified to its
reasonable satisfaction the nature of such payment and, on the basis thereof,
the proper account or accounts into which such payment is to be deposited. In
determining into which of the accounts, if any, referred to above any amount
received by the Trustee is to be deposited, the Trustee may conclusively rely
(in the absence of bad faith on the part of the Trustee) on the advice of the
Master Servicer. Unless the Trustee is advised differently in writing by the
Master Servicer, the Trustee shall assume that any amount remitted to it is to
be deposited into the Collection Account. The Trustee may establish from time to
time such deadline or deadlines as it shall determine are reasonable or
necessary in the administration of the Trust Estate after which all amounts
received or collected by the Trustee on any day shall not be deemed to have been
received or collected until the next succeeding Business Day.
(c) None of the Master Servicer, the Trustee nor the
institution then acting as Trustee shall have any right of set-off with respect
to any Trust Account, or any investment therein.
(d) So long as no Event of Default shall have occurred and be
continuing, all or a portion of the amounts in any Trust Account shall be
invested and reinvested by the Trustee pursuant to the written directions of the
Master Servicer in one or more Eligible Investments. Subject to the restrictions
on the maturity of investments set forth in Section 3.1(f), the Master Servicer
may authorize the Trustee to make the specific Eligible Investments set forth
therein, to make Eligible Investments from time to time consistent with the
general instructions set forth therein, or to make specific Eligible Investments
pursuant to instructions received in writing or by telegraph or facsimile
transmission from the employees of the Master Servicer, as the case may be,
identified therein, in each case in such amounts as the Master Servicer shall
specify.
(e) In the event that either (i) the Master Servicer shall
have failed to give investment directions to the Trustee by 12:30 P.M., Chicago
time on any Business Day on which there may be uninvested cash or (ii) an Event
of Default shall be continuing, the Trustee shall promptly invest and reinvest
the funds then in the designated Trust Account to the fullest extent practicable
in one or more Eligible Investments meeting the criteria in paragraph (e) of the
definition of "Eligible Investments", in accordance with Section 3.2(d). All
investments made by the Trustee shall mature no later than the maturity date
therefore permitted by Section 3.1(f).
(f) No investment of any amount held in any Trust Account
shall mature later than the Deposit Date preceding the Payment Date which is
scheduled to occur immediately following the date of investment. All income or
other gains (net of losses) from the investment of moneys deposited in any Trust
Account shall be deposited by the Trustee in such account immediately upon
receipt.
(g) Any investment of any funds in any Trust Account and any
sale of any investment held in such accounts, shall be made under the following
terms and conditions:
(i) each such investment shall be made in the name of
the Trustee or in the name of a nominee of the Trustee, in each case in
such manner as shall be necessary to maintain the identity of such
investments as assets of the Trust Estate;
(ii) any certificate or other instrument evidencing
such investment shall be delivered directly to the Trustee or its agent
and the Trustee shall have sole possession of such instrument, and all
income on such investment; and
(iii) the proceeds of any sale of an investment shall
be remitted by the purchaser thereof directly to the Trustee for
deposit in the account in which such investment was held.
(h) If any amounts are needed for disbursement from any Trust
Account and sufficient uninvested funds are not collected and available therein
to make such disbursement, in the absence of a written order from the Master
Servicer for the liquidation of investments held therein in an amount sufficient
to provide the required funds, the Trustee shall select and cause to be sold or
otherwise converted to cash a sufficient amount of the investments in such
accounts.
(i) The Trustee shall not in any way be held liable by reason
of any insufficiency in any Trust Account resulting from losses on investments
made in accordance with the provisions of this Section 3.1 including, but not
limited to, losses resulting from the sale or depreciation in the market value
of such investments (but the institution serving as Trustee shall at all times
remain liable for its own debt obligations, if any, constituting part of such
investments). The Trustee shall not be liable for any investment made by it in
accordance with this Section 3.1 on the grounds that it could have made a more
favorable investment or a more favorable selection for sale of an investment.
The Trustee may trade with itself or an Affiliate in the purchase or sale of
Eligible Investments.
SECTION 3.2. Establishment and Administration of the
Collection Account. (a) The Trustee shall cause to be established and maintained
a Collection Account for the Notes issued hereunder. The Collection Account
shall be an Eligible Bank Account initially established at the office of the
Trustee, bearing the following designation "TW Holdings II, Inc. -- Collection
Account, LaSalle National Bank, as Trustee". The Trustee shall possess all
right, title and interest in all funds on deposit from time to time in the
Collection Account and in all proceeds thereof. The Collection Account shall be
under the sole dominion and control of the Trustee for the benefit of the
Noteholders as their interests appear in the Trust Estate. If, at any time, the
Collection Account ceases to be an Eligible Bank Account, the Master Servicer
and the Trustee shall within 5 Business Days establish a new Collection Account
which shall be an Eligible Bank Account, transfer any cash and/or any
investments to such new Collection Account and from the date such new Collection
Account is established, it shall be the "Collection Account".
(a)(b) The Master Servicer agrees to cause amounts on deposit
in the Clearing Account to be deposited to the Collection Account on a daily
basis as provided in Section 5.3 hereof.
(c) The Master Servicer shall direct the Trustee, in writing,
to invest the amounts in each Collection Account in accordance with Sections
3.1(d), (e), (f) and (g).
(d) The Master Servicer shall instruct the Trustee in writing
to make withdrawals and payments from each Collection Account for the purposes
of carrying out the Master Servicer's and the Trustee's duties hereunder.
SECTION 3.3. Reserved.
SECTION 3.4. Distributions.
(a) On each Payment Date prior to an Acceleration Event (as
defined below), the Trustee shall disburse the Available Funds in the Collection
Account, based on the Servicer Report, in the following priority:
(i) to the Trustee, the Trustee Fee, plus any accrued
and unpaid Trustee Fees from any prior Due Periods and, reimbursement
to the Trustee of reasonable expenses incurred during the related Due
Period;
(ii) if TWRI is no longer the Master Servicer, to the
Master Servicer, the Master Servicer Fee, plus any accrued and unpaid
Master Servicer Fees from any prior Due Periods;
(iii) to the Noteholders, interest in an amount equal
to Note Interest Payment Amount, plus any accrued and unpaid Note
Interest Payment Amount from prior Due Periods;
(iv) to the Noteholders, in reduction of the
Outstanding Principal Amount of the Notes, an amount equal to the Note
Principal Payment Amount;
(v) so long as TWRI is the Master Servicer, to the
Master Servicer, the Master Servicer Fee, plus any accrued and unpaid
Master Servicer Fees from any prior Due Periods;
(vi) the remaining funds in the Collection Account, if
any, to or at the direction of the Borrower.
(b) On each Payment Date occurring upon or after the
occurrence of an Event of Default specified in this Indenture or the Credit
Agreement upon which the Outstanding Principal Amount of the Notes has been
accelerated in accordance with Section 6.2 of this Indenture (each, an
"Acceleration Event"), the Trustee shall, based on the Servicer Report, disburse
the balance of Available Funds in the following priority:
(i) to the Trustee, the Trustee Fee, plus any accrued
and unpaid Trustee Fees from any prior Due Periods and reimbursement of
reasonable expenses incurred by the Trustee during the related Due
Period and any unreimbursed reasonable expenses from prior Due Periods;
(ii) if TWRI is no longer the Master Servicer, to the
Master Servicer, the Master Servicer Fee, plus any accrued and unpaid
Master Servicer Fees from any prior Due Periods;
(iii) to the Noteholders, interest in an amount equal
to Note Interest Payment Amount, plus any accrued and unpaid Note
Interest Payment Amount from any prior Due Periods;
(iv) to the Noteholders, all remaining Available Funds
until the Outstanding Principal Amount of the Notes has been reduced to
zero; and
(v) if TWRI is the Master Servicer, to the Master
Servicer, the Master Servicer Fee, plus any accrued and unpaid Master
Servicer Fees from any prior Due Periods;
(vi) the remainder of funds held in the Collection
Account to or at the direction of the Borrower.
SECTION 3.5. Certifications to Noteholders. On each Payment
Date, concurrently with the distribution or allocation to the Noteholders, the
Trustee shall furnish to the Noteholders a certification (i) that the related
Servicer Report is complete on its face, and (ii) that no Event of Master
Servicer Termination has occurred, or if an Event of Master Servicer Termination
has occurred and is continuing, specifying the Event of Master Servicer
Termination or such event and its status.
Notwithstanding any provision of this Indenture to the
contrary, the Trustee shall have no duty or obligation with respect to the
information provided to it, including, without limitation, to verify, monitor or
otherwise supervise or administer the performance of the Master Servicer.
SECTION 3.6. Returned Payments. If the principal amount of any
Note or any other amount payable under any Note (including interest) shall have
been reduced by any distribution or allocation of any portion of collections or
other Payments on Trust Estate Receivables, and thereafter such distribution or
allocation is rescinded or must otherwise be returned by or on behalf of the
recipient thereof to the Borrower, the Trust Estate or any other creditor of the
Borrower for any reason, such principal or other amount distributed or allocated
in respect of such Note shall be increased by the amount of such distribution or
allocation to the extent so returned, all as though such distribution or
allocation had not been made.
ARTICLE 4.
THE TRUST ESTATE
SECTION 4.1. Acceptance by Trustee. (a) Pursuant to each
Collateral Assignment, the Trustee will acknowledge the related conveyance of
the Assets and other assets constituting the Trust Estate conveyed by the
Borrower pursuant to such Collateral Assignment, and the Trustee will hold such
Receivables and all other assets comprising the Trust Estate, in trust for the
benefit of the Noteholders subject to the terms and provisions hereof. Pursuant
to Section 4.7 hereof, the Trustee hereby appoints the Custodian to hold the
related Receivable Documents on behalf of the Trustee.
(a)(b) The Trustee shall perform its duties under this Section
4.1 and hereunder on behalf of the Trust Estate and for the benefit of the
Noteholders in accordance with the terms of this Indenture and applicable law
and, in each case, taking into account its other obligations hereunder, but
without regard to:
(i) any relationship that the Trustee or any Affiliate
of the Trustee may have with the related Obligor;
(ii) the ownership of any Note by the Trustee or any
Affiliate of the Trustee;
(iii) the Trustee's right to receive compensation for
its services hereunder or with respect to any particular transaction;
or
(iv) the ownership, or holding in trust for others, by
the Trustee of any other loans or property.
SECTION 4.2. Subsequent Transfers. (a) Subject to the
satisfaction of the conditions specified in Section 4.3 hereof and the terms of
this Indenture, on each Assignment Date, the Borrower shall pledge to the
Trustee, on behalf of the Trust Estate, and the Trust Estate shall accept the
pledge of Receivables (each, a "Transfer") from the Borrower.
(a)(b) On any Business Day which is an Assignment Date after
the Issuance Date, the Borrower shall give the Master Servicer and the Trustee
written notice of each Transfer (in each case, a "Transfer Notice") specifying
the Outstanding Principal Balance of each Trust Estate Receivable pledged
thereby to the Trust Estate on such Assignment Date. The Master Servicer shall
independently confirm and hereby represents and warrants as to, and the Trustee
may, without any duty to make any independent investigation with respect
thereto, rely on, the facts set forth in such Transfer Notice.
(c) On each Assignment Date following its delivery of a
Transfer Notice, the Borrower will complete, execute and deliver a Collateral
Assignment to the Trustee on behalf of the Trust Estate. The Trustee shall
deliver executed copies thereof to the Master Servicer, the Borrower and each
Noteholder. On each Assignment Date, the Borrower shall also deliver an original
executed UCC-1 financing statement with exhibits which describe the collateral
as the Receivables subject to the related Transfer.
(d) Following delivery of a duly executed Collateral
Assignment and a UCC-1 financing statement and subject to the satisfaction of
the conditions set forth in Sections 4.2(a) and 4.3, all Receivables specified
in such Collateral Assignment (including all Payments allocable to principal and
interest received after the related Cut-off Date) will be pledged to the Trustee
on behalf of the Trust Estate and such Receivables shall become Assets and part
of the Trust Estate. The Borrower shall deliver a revised Schedule of
Receivables to the Trustee and the Noteholders.
SECTION 4.3. Conditions Precedent to All Transfers.
Each Transfer shall be subject to the conditions precedent
that:
(a) On the related Assignment Date (including the initial
Transfer on the date hereof), the Borrower (with respect to itself and the
related Receivables) and the Master Servicer shall have certified and are deemed
to have represented and warranted hereunder and shall so represent and warrant
in the related Collateral Assignment that:
(i) the representations and warranties (A) of the
Borrower and TWRI set forth in Sections 11.1 and 11.2 hereof and (B) of
the Master Servicer set forth herein, are true and correct on and as of
such date, before and after giving effect to such Transfer, as though
made on and as of such date;
(ii) no event has occurred, or would result from such
Transfer or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default
but for the requirement that notice be given or time elapse or both;
(iii) each of the Borrower and TWRI is in material
compliance with each of its covenants set forth herein and in all
Warehouse Facility Documents; and
(iv) no event has occurred which constitutes an Event
of Master Servicer Termination or would constitute an Event of Master
Servicer Termination but for the requirement that notice be given or
time elapse or both.
(b) The Borrower shall have delivered to the Trustee and the
Noteholders an executed copy of the related Collateral Assignment, an executed
UCC-1 financing statement and an Officer's Certificate stating and representing
and warranting (and hereby represents and warrants) that all conditions
precedent to the effectiveness thereof as specified herein shall have been
satisfied;
(c) The Custodian shall have confirmed receipt of the related
Receivable Documents and shall have delivered a Receipt as provided in Section
4.8 hereof; and
(d) No Responsible Officer of the Trustee has actual knowledge
that any conditions to such Transfer have not been fulfilled, and no Noteholder
shall have notified the Trustee of the same, and the Trustee shall have received
such other documents, opinions, certificates and instruments as any Noteholder
or the Trustee may request.
SECTION 4.4. Grant of Security Interest; Tax Treatment. (a)
For purposes of legal form and the Intended Tax Characterization, it is the
intention of the parties hereto that this Indenture and each related Collateral
Assignment shall constitute a security agreement under applicable law, and that
the Borrower has granted to the Trustee on behalf of the Trust Estate for the
benefit of the Noteholders and other creditors of the Trust Estate, a first
priority perfected security interest in all of the Borrower's right, title and
interest in, to and under the Assets and the other assets constituting the Trust
Estate. The Trustee shall treat this Indenture and the Trust Estate as a
security device for tax purposes and shall not file tax returns or obtain an
employer identification number on behalf of the Trust Estate; provided, however,
that if the Notes are recharacterized as equity interests in the Trust Estate
for tax purposes, the parties hereto agree to treat such class as partnership
interests in a partnership under the New York Uniform Partnership Act in which
the Borrower was a general partner and each such recharacterized Noteholder was
a limited partner. In the event of such treatment, the Master Servicer shall
file all necessary tax returns or reports. The provisions of this Indenture
shall be construed in furtherance of the foregoing intended tax treatment. The
conveyance by the Borrower of the Assets to the Trustee on behalf of the Trust
Estate on each Assignment Date shall not constitute and are not intended to
result in an assumption by the Trustee or any Noteholder of any obligation of
the Borrower or the Master Servicer to the obligors, or any other Person in
connection with the Assets.
(a)(b) It is the intention of the parties hereto that, with
respect to all Taxes, the Notes will be treated as indebtedness of the Borrower
to the Noteholders secured by the Assets (the "Intended Tax Characterization").
The Borrower, the Master Servicer and the Trustee, by entering into this
Indenture, and each Noteholder by the purchase of a Note, agree to report such
transactions for purposes of all Taxes in a manner consistent with the Intended
Tax Characterization.
(c) The Borrower and the Master Servicer shall take no action
inconsistent with the Trustee's interest in the Assets and shall indicate or
shall cause to be indicated in its books and records held on its behalf that
each Trust Estate Receivable and the other assets constituting the Trust Estate
has been pledged to the Trustee on behalf of the Trust Estate and the
Noteholders.
SECTION 4.5. Further Action Evidencing Assignments. (a) The
Borrower and the Master Servicer each agrees that, from time to time, at its
respective expense, it will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or
appropriate, or that the Master Servicer or the Trustee or the Noteholders may
reasonably request, in order to perfect, protect or more fully evidence the
security interest in the Assets or to enable the Trustee to exercise or enforce
any of its rights hereunder, and under any Collateral Assignment. Without
limiting the generality of the foregoing, the Borrower will, without the
necessity of a request and upon the request of the Master Servicer or the
Trustee, execute and file (or cause to be executed and filed) such financing or
continuation statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or appropriate including,
without limitation, recording and filing UCC-1 financing statements, amendments
or continuation statements with such state and county offices as is necessary to
perfect a security interest: (i) each Assignment Date, and (ii) prior to the
effective date of any change of the name, identity or structure or relocation of
its chief executive office or any change that would or could affect the
perfection pursuant to any financing statement or continuation statement or
assignment previously filed or make any UCC-1 or continuation statement
previously filed pursuant to this Indenture seriously misleading within the
meaning of applicable provisions of the UCC (and the Borrower shall give the
Trustee at least 30 Business Days prior notice of any circumstance in (ii)
before the same occurs). The Borrower shall deliver promptly to the Trustee
file-stamped copies of any such filing.
(a)(b) (i) The Borrower hereby grants to each of the Master
Servicer and the Trustee a power of attorney to execute all documents on behalf
of the Borrower as may be necessary or desirable to effectuate the foregoing and
(ii) the Master Servicer hereby grants to the Trustee a power of attorney to
execute all documents on behalf of the Master Servicer as may be necessary or
desirable to effectuate the foregoing; provided, however, that such grant shall
not create a duty on the Trustee to file, prepare, record or monitor or any
responsibility for the contents or adequacy of any such documents.
SECTION 4.6. Substitution of Receivables and Release of Liens.
(a) From time to time, the Borrower may Grant Substitute Receivables to the
Trustee for inclusion in the Trust Estate and may contemporaneously request the
release of a Trust Estate Receivable (i) for which the Borrower intends to
effect a Liquidation, (ii) for which there is a breach of any of the
representations and warranties set forth in Sections 11.1 or 11.2, (iii) for
which original Receivable Documents required hereunder have not been delivered
to the Custodian which would adversely affect the Trustee's or the Master
Servicer's ability to enforce the obligations of the Obligor, (iv) for which
filings or other actions required in Section 4.5 have not been taken, (v) which
has ceased to be an Eligible Receivable, (vi) for which all amounts due in
respect of such Trust Estate Receivable have been paid in full, or (vii) for
which the related Obligor wishes to effect an Upgrade.
(b) Upon delivery of (i) a Collateral Assignment for such
Substitute Receivable, and (ii) delivery of a Receipt by the Custodian of the
Receivable Documents for such Substitute Receivable, the Trustee on behalf of
the Trust Estate shall release such Trust Estate Receivable and shall execute a
request for release substantially in the form attached as Exhibit F (a "Request
for Release") prepared by the Master Servicer which the Trustee will deliver to
the Custodian to release the related Receivable Documents to the Borrower, and
the Trustee shall assign without representation or warranty and without recourse
to the Borrower all of the Trust Estate's right, title and interest in such
Trust Estate Receivable. Upon such substitution, such Receivable will be
released from the lien of the Indenture. All documents of assignment shall be
prepared in accordance with Section 4.2 hereof.
SECTION 4.7. Appointment of Custodian; Delivery of Receivable
Documents; Verification (a) The Trustee hereby appoints Sage Systems, Inc. (the
"Custodian"), in its independent corporate capacity, as the custodian and bailee
with respect to the Receivable Documents that are related to the Trust Estate
Receivables. The Custodian hereby accepts such appointment and agrees to
maintain and hold all such Receivable Documents received by it for the exclusive
benefit of the Trustee, as trustee for the Noteholders. With respect to such
Receivable Documents, the Custodian agrees to act in accordance with this
Indenture and in accordance with any directions of the Trustee. Under no
circumstances shall the Custodian (i) deliver possession of any Receivable
Documents to the Borrower or any other Person, or (ii) take any directions with
respect to any Receivable Documents from the Borrower or any other Person,
without the express written consent of the Trustee or the Noteholders.
(b) On a date at least five Business Days prior to a proposed
Assignment Date, the Borrower shall deliver or cause to be delivered (A) to the
Custodian, Trustee and each Noteholder (i) a draft Collateral Assignment, and
(ii) a revised draft of a Schedule of Receivables, which shall include the
Receivables the Borrower wishes to pledge to the Trust Estate, and (B) to the
Custodian, each Receivable Document listed in the definition of "Receivable
Documents".
(c) Upon receipt of the documents described in (b) above, the Custodian
shall verify that (i) all documents required to be delivered to it pursuant to
this Indenture are in the Custodian's possession, (ii) such documents appear
regular on their face and relate to the appropriate Receivable and none of the
Receivable Documents contains evidence of any claims, liens, security interests
or encumbrances (other than the Lien of this Indenture), and that (iii) the
information contained in the Schedule of Receivables matches the related
information in the Receivable Documents.
If the Custodian determines from such verification that any discrepancy
or deficiency exists with respect to any Receivable Document, the Custodian
shall note such discrepancy or deficiency on a schedule (a "Schedule of
Exceptions") which the Custodian shall deliver (in both hard copy and electronic
format acceptable to the Noteholders) to the Borrower, the Trustee and each
Noteholder within two Business Days prior to the proposed Assignment Date. The
delivery of such Schedule of Exceptions shall be the Custodian's representation
that, other than the discrepancies and deficiencies described in such Schedule
of Exceptions, all Receivable Documents required to be delivered hereunder are
in the possession of the Custodian. The Trustee shall not accept the pledge of
Receivables that are listed in such Schedule of Exceptions without the express
written consent of the Noteholders.
SECTION 4.8. Receipts. On the Business Day immediately
preceding an Assignment Date, the Custodian shall deliver (in both hard copy and
electronic format acceptable to the Noteholders) (i) an original certification
and receipt in the form attached hereto as Exhibit G (a "Receipt") to the
Trustee, and (ii) copies to the Borrower and each Noteholder. Each Receipt shall
include a list of all Trust Estate Receivables, including such newly pledged
Trust Estate Receivables, for which the Custodian is holding Receivable
Documents.
SECTION 4.9. Duties of Custodian.
(a) Standard of Care. The Custodian shall use reasonable care,
in accordance with the standard customs adhered to by institutions that act as
custodians in the performance of its obligations hereunder.
(b) Facilities. The Custodian shall maintain continuous
custody of all items delivered to it in secure fireproof facilities located at
2553 B 152nd Avenue, Space #15K2, Redmond, Washington 98052. All Receivable
Documents will be marked and physically separated from the files relating to
other receivables for which the Custodian holds on behalf of itself or others.
The Custodian shall provide access to the facilities to the Trustee and each
Noteholder or their related representatives at such time as the each may
reasonably request.
(b) Reviews. The Custodian shall conduct, or cause to be
conducted, periodic reviews of all items held by it under this Indenture in such
a manner as shall enable the Trustee and each Noteholder to verify the accuracy
of the Custodian's record keeping. The Custodian shall immediately report to the
Trustee and each Noteholder of any defect with respect to a Receivable Document
or any failure on its part to hold the Receivable Documents as herein provided.
(c) Release of Documents. Upon receipt of a Request for
Release as provided in Section 4.6 hereof, the Custodian shall, within five
Business Days, deliver the requested Receivable Documents as directed in such
Request for Release. Receivable Documents properly released as provided in
Section 4.6 shall be free of the lien of this Indenture. Upon notice of an Event
of Default whereby the Assets are to be liquidated under Section 6.3 or a
Securitization Take-out from the Trustee, the Custodian shall cooperate to
effect the transfer of the Receivable Documents to such third parties as is
necessary.
(f) Insurance. The Custodian shall, at its own expense,
maintain at all times during the existence of this Indenture, and keep in full
force and effect (a) fidelity insurance, (b) theft of document insurance, (c)
forgery insurance, and (d) insurance covering the risk of errors and omissions.
All such insurance shall be in amounts, with standard coverage and subject to
deductibles, as are customary for insurance typically maintained by banks that
act as custodians in similar transactions. A certificate of the respective
insurer as to each such policy shall be furnished to the Trustee, upon request,
stating that such policy is in full force and effect.
(g) Updated Receipt and Receivable Data. On each Determination
Date or, within two Business Days of a request from the Trustee or a Noteholder,
the Custodian shall provide (i) an updated Receipt (in both hard copy and
electronic format acceptable to the Noteholders) to the Trustee or a Noteholder,
as the case may be, as to the Receivable Documents in its possession and (ii)
such electronic data regarding the Trust Estate Receivables reasonably requested
by the Noteholders in a format acceptable to the Noteholders.
(h) Copies of Receivable Documents. Upon request from the
Trustee or a Noteholder, the Custodian shall, at the cost and expense of the
requesting party (other than the Trustee), provide copies of Receivable
Documents.
SECTION 4.10. Representations and Warranties of Custodian. The
Custodian represents and warrants to the Trustee and the Noteholders that:
(a) The Custodian (i) is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
(ii) has full corporate power and authority to conduct its business and affairs
as a Custodian;
(b) The Custodian does not control, is not controlled by nor
is under common control with, the Borrower;
(c) In respect of other lenders of TWRI where the Custodian is
acting as custodian, the Custodian is (i) in possession of all loan files
required by the related loan documents, and (ii) is in compliance with such loan
documents; and
(d) This Agreement, when executed and delivered by the
Custodian, shall constitute the valid, legal and binding obligation of the
Custodian, enforceable against the Custodian in accordance with its terms,
except as the enforcement thereof may be limited by applicable receivership or
similar debtor relief laws and that certain equitable remedies may not be
available regardless of whether enforcement is sought in equity or at law.
SECTION 4.11. Indemnification of Custodian. The Custodian
hereby agrees to indemnify and hold the Trustee, the Borrower, the Noteholder,
their shareholders, affiliates, directors, officers, employees, agents,
successors and assigns, harmless from and against any and all losses, claims,
demands, causes of action, or other legal proceedings, judgments, costs,
liabilities and/or expenses, including all reasonable attorney's fees, incurred
resulting from the Custodian's negligence, willful misconduct or failure to
perform its obligations hereunder, or a breach of any representation or warranty
by the Custodian contained in this Indenture. The foregoing indemnification
provisions set forth shall survive any termination of this Indenture.
SECTION 4.12. Adverse Interests. By execution of this
Indenture, the Custodian represents, warrants and covenants that it does not
currently hold, and during the existence of this Indenture shall not hold, any
adverse interest, by way of security or otherwise, in any Trust Estate
Receivable, and hereby waives and releases any such interest that it may have in
any Trust Estate Receivable as of the date hereof. Notwithstanding any other
provisions of this Indenture and without limiting the generality of the
foregoing, the Custodian shall not at any time exercise or seek to enforce any
claim, right or remedy, including any statutory or common law rights of set-off,
if any, that the Custodian may otherwise have against all or any part of a
Receivable Document, Trust Estate Receivable or proceeds of either.
SECTION 4.13. Termination of Custodian. (a) The Noteholders
may, without cause, request that the Custodian be replaced with a successor
custodian. Upon receipt of written directions from the Noteholders that the
Noteholders desire to replace the Custodian with a successor custodian, the
Trustee shall promptly notify the Custodian that all its rights and obligations
under this Indenture are terminated and immediately appoint the successor
custodian as Custodian.
(b) Upon receipt of such notice, the Custodian will take such
actions as are necessary to best facilitate the transition of the performance of
the Custodian's activities to the successor Custodian, and the Borrower and the
Custodian shall assist the successor custodian to assume and perform the duties
of the Custodian hereunder (including, without limitation, the immediate
delivery of all Receivable Documents and Receivable Files to the successor
custodian).
ARTICLE 5.
SERVICING OF ASSETS
SECTION 5.1. Appointment of Master Servicer. (a) The
servicing, administering and collection of the Trust Estate Receivables shall be
conducted by the Master Servicer designated from time to time in accordance with
this Section. Until the Trustee (acting upon the direction of the Noteholders)
gives notice (the "Successor Notice") to the Borrower and the Master Servicer of
the designation of a new Master Servicer, TWRI is hereby designated as, and
hereby agrees to perform the duties and obligations of, Master Servicer in
accordance with the terms of this Indenture. The Trustee and the Noteholders
agree not to provide the Borrower and the Master Servicer with a Successor
Notice unless an Event of Master Servicer Termination shall have occurred and be
continuing and shall remain unremedied for five Business Days after written
notice thereof shall have been given to the Borrower and the Master Servicer by
the Trustee.
(b) Upon receipt of a Successor Notice or upon resignation of
the Master Servicer pursuant to Section 5.1(c), the Master Servicer will take
such actions as are necessary to best facilitate the transition of the
performance of the Master Servicer's activities to the new Master Servicer and
the Borrower and Master Servicer shall assist the new Master Servicer to assume
and perform the duties of the Master Servicer hereunder.
Without limiting the foregoing, the Master Servicer agrees that:
(i) the Trustee, at the direction of the Noteholder,
may direct some or all of the Obligors to make payment of all amounts payable
under any Trust Estate Receivables directly to the Trustee, to the new Master
Servicer or through a lockbox account designated by the Trustee;
(ii) the Master Servicer shall at the Master Servicer's
expense, give notice of the Trustee's security interest in the Trust Estate
Receivables to each Obligor and direct that payments be made directly to the
Trustee, to the new Master Servicer or through a lockbox account designated by
the Trustee;
(iii) the Master Servicer shall (A) assemble all of the
documents, instruments and other records (including, without limitation,
computer programs, tapes and disks) in its possession which evidence the Trust
Estate Receivables, the related Receivable Documents, or which are otherwise
necessary or desirable to collect such Trust Estate Receivables, and shall make
the same available to the Trustee or the new Master Servicer at a place selected
by the Trustee, (B) segregate all cash, checks and other instruments received by
it from time to time constituting Collections in a manner acceptable to the
Trustee and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer, to the
Trustee, the new Master Servicer or the Collection Account, as the case may be,
and (C) permit the successor Master Servicer and its agents, employees and
assignees access to its facilities and its books, records, documents and
instruments including, without limitation, computer programs, tapes and disks
related to the Trust Estate Receivables; and
(iv) the Trustee or any new Master Servicer is
authorized to take any and all steps in the Seller's name and on behalf of the
Seller necessary or desirable, in the Trustee's determination, to collect all
amounts due under the Trust Estate Receivables, including, without limitation,
endorsing the Borrower's name on checks and other instruments representing
payments on the Trust Estate Receivables and enforcing such Trust Estate
Receivables and the related Receivable Documents.
(c) The Master Servicer's authorization to act as servicer of
the Trust Estate Receivables under this Indenture shall terminate on the first
day following the Commitment Termination Date on which (i) the Outstanding
Principal Amount of the Notes shall be reduced to zero and (ii) all obligations
hereunder shall have been fully paid and performed.
(d) TWRI acknowledges that the Trustee and the Noteholders
have relied on TWRI's agreement to act as the initial Master Servicer hereunder
in their respective decisions to execute and deliver the Warehouse Facility
Documents. TWRI agrees not to resign as Master Servicer and, until any Successor
Notice shall have been delivered to TWRI, to continue to perform all of the
duties of the Master Servicer hereunder unless it shall have determined that the
performance of such duties shall no longer be permitted by applicable law
SECTION 5.2. Duties of Master Servicer; Subservicers.
(a) The Master 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 Trust Estate Receivables, the Vacation Credits, the
enforcement of the Trustee's security interest in the Trust Estate Receivables,
and if applicable, the resale of the Vacation Credits, each in accordance with
applicable law and the standards and procedures set forth in this Indenture. The
Master Servicer agrees 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 receivables and Vacation
Credits owned or serviced by them, and to the extent more exacting, the
procedures used by the Master Servicer in respect of timeshare receivables
serviced by it for its own account. The duties of the Master Servicer shall
include collection and posting of all payments, responding to inquiries of
Obligors on the Trust Estate Receivables, investigating delinquencies, sending
payment coupons to Obligors, reporting tax information to Obligors, accounting
for collections, using its best efforts to maintain the perfected security
interest of the Trustee in the Trust Estate, and furnishing the monthly
statements to the Trustee and each Noteholder substantially in the form of
Exhibit E hereto (the "Servicer Report"), which statements shall be delivered no
later than the Determination Date for the related Payment Date. Each monthly
statement shall be accompanied by a current certificate from the Master Servicer
and each Subservicer, if any, stating that to the best of the knowledge and
information of the Master Servicer or such Subservicer after examination of
relevant books and records, TWRI has not sold except to the Trustee, or granted
a security interest in, any Trust Estate Receivable. The Master Servicer shall
have, subject to the terms of this Indenture, full power and authority, acting
alone and subject only to the specific requirements and prohibitions of this
Indenture, to do any and all things in connection with such managing, servicing,
administration and collection that it may deem necessary or desirable. Without
limiting the generality of the foregoing, but subject to the other provisions of
this Indenture, the Master Servicer is authorized and empowered by the Trustee,
acting on behalf of the Noteholders, to execute and deliver, on behalf of
itself, the Trustee, the Noteholders or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all comparable instruments, with respect to the Trust Estate Receivables. The
Trustee shall furnish the Master Servicer with all powers of attorney or other
documents necessary or appropriate to enable the Master Servicer to carry out
its servicing and administrative duties hereunder. Notwithstanding anything
herein to the contrary, the Trustee shall have no liability for any action taken
by the Master Servicer under the preceding authorization.
(b) The Master Servicer may enter into Subservicing Agreements
with one or more Subservicers approved by the Trustee at the direction of the
Noteholder for the servicing and administration of certain of the Trust Estate
Receivables. The Trustee and the Noteholders hereby agree that Sage Systems,
Inc. is an approved Subservicer. The Master Servicer shall notify the Trustee
promptly if a Subservicer is hired. References in this Indenture to actions
taken or to be taken by the Master Servicer in servicing the Trust Estate
Receivables include actions taken or to be taken by a Subservicer on behalf of
the Master Servicer and the Trustee. Each Subservicing Agreement will be upon
such terms and conditions as are not inconsistent with this Indenture and as the
Master Servicer and the Subservicer have agreed. The Master Servicer and a
Subservicer may enter into amendments thereto or different forms of Subservicing
Agreements; provided, however, that any such amendments or different forms shall
be consistent with and not violate the provisions of this Indenture or
materially adversely affect the rights of the Trustee or the Noteholders.
The Master Servicer shall be entitled to terminate any
Subservicing Agreement that may exist in accordance with the terms and
conditions of such Subservicing Agreement and without any limitation by virtue
of this Indenture; provided, however, that in the event of termination of any
Subservicing Agreement by the Master Servicer or the related Subservicer, the
Master Servicer shall either act directly as servicer of the related Trust
Estate Receivables or enter into a Subservicing Agreement with a successor
Subservicer approved by the Trustee which will be bound by the terms of the
related Subservicing Agreement.
Notwithstanding any Subservicing Agreement, any of the
provisions of the Agreement relating to agreements or arrangements between the
Master Servicer or a Subservicer or reference to actions taken through such
Persons or otherwise, the Master Servicer shall remain obligated and liable to
the Trustee and the Noteholders for the servicing and administering of the Trust
Estate Receivables in accordance with the provisions of this Indenture without
diminution of such obligation or liability by virtue of such Subservicing
Agreement or arrangements or by virtue of indemnification from a Subservicer and
to the same extent and under the same terms and conditions as if the Master
Servicer alone were servicing and administering the Trust Estate Receivables.
The Master Servicer shall be entitled to enter into any agreement with a
Subservicer for indemnification of the Master Servicer, and nothing contained in
this Indenture shall be deemed to limit or modify such indemnification.
Any Subservicing Agreement that may be entered into and any
other transactions or servicing arrangements relating to the Trust Estate
Receivables involving a Subservicer or an affiliate of the Master Servicer in
its capacity as such shall be deemed to be between the Subservicer or other
affiliate of the Master Servicer, as the case may be, and the Master Servicer
alone, and the Trustee and the Noteholders shall not be deemed parties thereto
and shall have no claims, rights, obligations, duties or liabilities with
respect to the Subservicer except as set forth in the immediately succeeding
paragraph; provided that the Trustee and the Noteholders may rely upon all
representations and warranties of the Subservicer contained therein.
In the event the Master Servicer shall for any reason no
longer be servicing any of the Trust Estate Receivables, the Trustee shall act
as successor servicer, and thereupon assume all of the rights and obligations of
such Master Servicer. In such event, the Trustee shall be deemed to have assumed
all of the Master Servicer's interest therein arising after the date of such
assumption and to have replaced the Master Servicer as a party to each such
Subservicing Agreement to the same extent as if such Subservicing Agreement had
been assigned to the assuming party except that the Master Servicer shall not
thereby be relieved of any liability or obligations under the Subservicing
Agreement and the Trustee shall not assume any such liability. The Trustee may,
if a successor Master Servicer has not been appointed by the Noteholders in
writing within 60 days of the delivery of the Successor Notice, seek the
assistance of a third party to locate a successor Master Servicer acceptable to
the Noteholders. The Master Servicer shall, upon request of the Trustee but at
the expense of the Master Servicer, deliver to the assuming party all documents
and records relating to each such Subservicing Agreement and the Trust Estate
Receivables then being serviced and an accounting of amounts collected and held
by it and otherwise use its best efforts to effect the orderly and efficient
transfer of the Subservicing Agreement to the assuming party.
The Master Servicer shall retain all data (including, without
limitation, computerized records) relating directly to or maintained in
connection with the servicing of the Trust Estate Receivables at 9805 Willows
Road, Redmond, Washington 98052 or at the office of any Subservicer or, upon 15
days' notice to the Trustee, at such other place where the servicing offices of
the Master Servicer are located, and shall give the Trustee and the Noteholders
access to all data at all reasonable times, and, during the continuation of an
Event of Master Servicer Termination or an Event of Default, the Master Servicer
shall, on demand of the Trustee, deliver or cause to be delivered to the Trustee
all data (including, without limitation, computerized records and, to the extent
transferable, related operating software) necessary for the servicing of the
Trust Estate Receivables and all monies collected by it and required to be
deposited in or credited to the Collection Account.
(c) The Master Servicer may, from time to time and with the
consent of the Trustee and the Noteholders, make changes to the Credit and
Collection Policies, provided that no such change can materially impair the
collectibility of any Trust Estate Receivable. Copies of each such revised
Credit and Collection Policies shall replace the version existing as Exhibit B
of the Credit Agreement.
(d) Except as set forth in Section 5.6(b) hereof, all expenses
incurred by the Master Servicer, including expenses incurred by any Subservicer
in performing their obligations hereunder shall be for the account of the Master
Servicer, and the Trustee and the Noteholders shall have no obligations to make
any payments in respect thereof.
(e) The Master Servicer will make all UCC filings and
recordings as may be required pursuant to the terms of this Indenture. The
Master 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 Master
Servicer to re-perfect or to cause the re-perfection of such security interests
on its behalf as Trustee, as necessary.
SECTION 5.3. Collection Responsibilities; Receivable
Modifications.
(a) The Master Servicer shall, on behalf of the Trustee,
collect all payments made under each Trust Estate Receivable and shall use its
best efforts (in accordance with the servicing standard set forth in Section
5.2) to collect from each Obligor all payments on or in respect of such Trust
Estate Receivable after the related Cut-off Date. The Master Servicer may in its
discretion waive any assumption fees, late payment charges, charges for checks
returned for insufficient funds, prepayment fees, if any, or other fees which
may be collected in the ordinary course of servicing the Trust Estate
Receivables.
(b) The Master Servicer shall cause each Obligor to remit his
or her payments to a clearing account (the "Clearing Account") which shall be an
Eligible Bank Account. The Master Servicer shall cause any payments made by
automated clearing house debit to be deposited directly into the Clearing
Account from each Obligor's relevant account. On each Business Day, the Master
Servicer shall cause all amounts on deposit in the Clearing Account related to
the Trust Estate Receivables to be remitted to the Collection Account for
distribution in accordance with Section 3.4 of this Indenture.
(c) The Master Servicer shall hold in trust for the benefit of
the Trustee and the Noteholders any payments it receives until such time as it
shall transfer such payments to the Clearing Account. Any amounts held in the
Clearing Account shall be held in trust for the benefit of the Trustee and the
Noteholders.
SECTION 5.4. Maintenance of Insurance.
The Master Servicer shall and shall cause any Subservicer to
keep in force during the term of this Indenture a policy or policies of
insurance covering errors and omissions in the operation of the Master
Servicer's or such Subservicer's procedures, and a fidelity bond. Such policy or
policies and fidelity bond shall be in such form and amount that is customarily
kept by institutions which service receivables similar to the Trust Estate
Receivables. The Master Servicer shall be deemed to have complied with this
provision if an affiliate of the Master Servicer has such errors and omissions
and fidelity bond coverage and, by the terms of such insurance policy or
fidelity bond, the coverage afforded thereunder extends to the Master Servicer.
Each such errors and omissions policy and fidelity bond shall not be canceled
without 30 days, prior written notice to the Trustee and the Noteholders.
SECTION 5.5. Assumption and Substitution Agreements. (a) The
Master Servicer shall not modify, waive or amend the terms of any Trust Estate
Receivable unless a default on such Trust Estate Receivable has occurred or is
imminent or unless such modification, amendment or waiver shall not (i) alter
the interest rate on or the principal balance of such Trust Estate Receivable,
(ii) alter the final maturity of, or any other terms of, such Trust Estate
Receivable which would have a material adverse affect on Noteholders, (iii)
materially impair the Vacation Credits underlying such Trust Estate Receivable
or (iv) reduce materially the likelihood that payments of interest and principal
on such Trust Estate Receivable shall be made when due; provided, further, the
Master Servicer may grant an extension of the final maturity of a Trust Estate
Receivable if the Master Servicer, in its sole discretion, determines that (a)
such Trust Estate Receivable is in default or default on such Trust Estate
Receivable is likely to occur in the foreseeable future, and (b) that the value
of the Trust Estate Receivable will be enhanced by such extension; provided,
further, that the Master Servicer shall not (1) grant more than one extension
per calendar year with respect to a Trust Estate Receivable or (2) grant an
extension for more than one calendar month with respect to a Trust Estate
Receivable;
(b) the Master Servicer may consent to the assumption by a
Person of the Installment Sale Contract related to a Trust Estate Receivable;
provided, however, in connection with any such assumption, the rate of interest
borne by, the maturity date of, the principal amount of, the timing of payments
of principal and interest in respect of, and all other material terms of, the
related Trust Estate Receivable shall not be changed.
SECTION 5.6. Realization Upon Defaulted Receivables.
(a) In connection with the foreclosure or liquidation of any
Defaulted Receivable, the Master Servicer shall follow such practices and
procedures as it shall deem necessary or advisable and as shall be normal and
usual in its general servicing activities. The Master Servicer shall be required
to expend its own funds in connection with the liquidation of any Defaulted
Receivable if it shall determine that such expenditures will increase the
Liquidation Proceeds available to the Borrower after reimbursement to the Master
Servicer for its Liquidation expenses.
(b) Liquidation expenses incurred by the Master Servicer can
be repaid to the Master Servicer only from Liquidation Proceeds from sale or
other disposition of the related Defaulted Receivables.
SECTION 5.7. Representations and Warranties as to the Master
Servicer. The Master Servicer represents and warrants to the Trustee for the
benefit of the Noteholders that:
(a) Organization and Good Standing. The Master Servicer shall
have been duly organized and shall be validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, with power and
authority to own its properties and to conduct its business as such properties
shall be currently owned and such business is presently conducted.
(b) Due Qualification. The Master Servicer shall be duly
qualified to do business as a foreign corporation in good standing, and shall
have obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of property or the conduct of its business shall require
such qualifications, except where the failure to so qualify or to have obtained
such licenses and approvals would not have a material adverse effect on the
ability of the Master Service to perform its obligations under this Indenture or
the other Warehouse Facility Documents to which its in and is a party.
(c) Power and Authority. The Master Servicer shall have the
power and authority to executive, deliver and perform its obligations under the
Agreement and each other Warehouse Facility Document to which it is a party and
to carry out their respective terms, and the execution, delivery and performance
of this Indenture and each other Warehouse Facility Document to which it is a
party shall have been duly authorized by the Master Servicer by all necessary
corporate action.
(d) Binding Obligation. This Agreement shall constitute a
legal, valid and binding obligation of the Master Servicer enforceable in
accordance with its terms, except as enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors, rights in general and by general principals of equity.
(e) No Violation. The consummation of the transactions
contemplated by this Indenture and the other Warehouse Facility Documents to
which the Master Servicer is a party and the fulfillment of the terms of this
Indenture and the other Warehouse Facility Documents shall not conflict with,
result in any breach of any of the terms and provisions of, nor constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Master Servicer, or conflict with or violate any
of the terms or provisions of, or constitute (with or without notice or lapse of
time) a default under, any material indenture, agreement or other instrument to
which the Master Servicer is a party or by which it shall be bound; nor violate
any law or, to the best of the Master Servicer's knowledge, nay order, rule or
regulation applicable to the Master Servicer of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Master Servicer or its properties;
which breach, default, conflict or violation would have a material adverse
effect on the ability of the Master Servicer to perform its obligations under
this Indenture or any other Warehouse Facility Documents to which it is a party.
(f) On the basis of a comprehensive review and assessment of
the Master Servicer's systems and equipment and inquiry made of the Master
Servicer's material suppliers, vendors, customers and Subservicers, the Master
Servicer reasonably believes that the Year 2000 Problem, including costs of
remediation, will not result in a material adverse change in the operations,
business, properties, condition (financial or otherwise) or prospects of the
Master Servicer. The Master Servicer has developed and has required that all
Subservicers develop feasible contingency plans adequate to ensure uninterrupted
and unimpaired business operation in the event of the failure of its own or a
third party's system or equipment due to the Year 2000 problem, including those
of vendors, customers, and suppliers, as well as a general failure of or
interruption in its communication and delivery infrastructure.
SECTION 5.8. Existence; Status as Master Servicer; Merger.
(a) The Master Servicer shall keep in full effect its
existence, rights and franchises as a corporation under the laws of the state of
its organization and shall obtain and preserve its qualification to do business
as a foreign corporation, in each case to the extent necessary to protect the
validity and enforceability of the Trust Estate Receivables and this Indenture.
(b) The Master Servicer shall not consolidate with or merge
into any other Person or convey, transfer or lease substantially all of its
assets as an entirety to any Person unless the Person formed by such
consolidation or into which the Master Servicer has been merged or the Person
which acquires substantially all the assets of the Master Servicer as an
entirety is a corporation organized under the laws of a state in the United
States, can lawfully perform the obligations of the Master Servicer hereunder
and executes and delivers to the other parties hereto an agreement, in form and
substance reasonably satisfactory to the Trustee (acting upon the direction of
the Noteholders), which contains an assumption by such successor entity of the
due and punctual performance and observance of each covenant and condition to be
performed or observed by the Master Servicer under this Indenture.
(c) From the date hereof until the first day following the
Commitment Termination Date on which (i) the Notes shall have been paid in full,
and (ii) all obligations shall have been fully paid and performed, the Master
Servicer shall, promptly after learning thereof notify the Trustee of (i) the
details of any action, proceeding, investigation or claim against or affecting
the Master Servicer instituted before any court, arbitrator or Governmental
Authority or, to its knowledge threatened to be instituted, which, if determined
adversely to the Master Servicer would be likely to have a material adverse
effect on the performance by it of its obligations under any Warehouse Facility
Document to which is a part or by which it is bound.
SECTION 5.9. Performance of Obligations. The Master Servicer
shall not take any action or, to the extent within its control, permit any
action to be taken by others, which would excuse any Obligor from any of its
covenants or obligations under any Receivable Document which could have an
adverse affect on the Noteholders without the written consent of the Trustee at
the direction of the Noteholders.
SECTION 5.10. Event of Master Servicer Termination. The
following shall constitute an Event of Master Servicer Termination:
(a) the occurrence of an Event of Default with respect to
the Master Servicer under Sections 6.1(a), (b) and (c); or
(b) if, as of any Payment Date, (i) the Charge-off Rate or the
Consolidated Charge-off Rate exceeds 5% per annum, (ii) the average of the
Delinquency Rate Amounts or the Consolidated Delinquency Rate Amounts, in either
case for the three Due Periods immediately preceding the Due Period in which
such Payment Date occurs exceeds 5%, or (iii) the average of the Defaulted
Receivable Amounts or the Consolidated Defaulted Receivable Amounts, in either
case for the three Due Periods immediately preceding the Due Period in which
such Payment Date occurs exceeds 3%.
SECTION 5.11. Optional Purchase of Vacation Credits. On any
Determination Date, if no Event of Default has occurred and is continuing, the
Master Servicer may, at its option, purchase the Vacation Credits relating to a
Defaulted Receivable at the Vacation Credit Purchase Price. The Master Servicer
shall remit the Vacation Credit Purchase Price to the Trustee for immediate
deposit into the Collection Account and such remittance shall be deemed to be a
collection of principal with respect to such Defaulted Receivable. Upon the
deposit of the Vacation Credit Purchase Price, the Vacation Credits purchased
pursuant to this Section 5.11 shall be released from the lien of this Indenture.
ARTICLE 6.
EVENTS OF DEFAULT; REMEDIES
SECTION 6.1. Events of Default.
"Event of Default," wherever used herein with respect to the
Notes, means any one of the following:
(a) (i) default in the making of Principal Payments or
Interest Payments in respect of the Notes when such become due and payable, and
continuance of such default for two Business Days; or (ii) failure to make any
deposit when due hereunder by the Master Servicer or the Trustee and continuance
of such default for one Business Day; or
(b) a default in the performance, or breach, of any covenant
of the Borrower or the Master Servicer in this Indenture (other than a covenant
dealing with a default in the performance of which or the breach of which is
specifically dealt with elsewhere in this Section 6.1) and continuance of such
default or breach for a period of 30 days after the earliest of (i) any officer
of the Borrower or the Master Servicer first acquiring knowledge thereof, (ii)
the Trustee's giving written notice thereof to the Borrower or (iii) the holders
of a majority of the then Outstanding Principal Amount of the Notes giving
written notice thereof to the Borrower and the Trustee; or
(c) if any representation or warranty of the Borrower or the
Master Servicer made in this Indenture shall prove to be incorrect in any
material respect as of the time when the same shall have been made, and such
breach is not remedied within 30 days after notice of breach from the Trustee or
the holders of a majority of Outstanding Principal Amount of the Notes; or
(d) the entry by a court having jurisdiction in the premises
of (i) a decree or order for relief in respect of the Borrower in an involuntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or (ii) a decree or order adjudging the
Borrower a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment, or composition of or in respect
of the Borrower under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator, or other
similar official of the Borrower or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days; or
(e) the commencement by the Borrower of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Borrower in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization, or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator, or similar official of the Borrower or of any
substantial part of its property, or the making by it of an assignment for the
benefit of creditors, or the Borrower's failure to pay its debts generally as
they become due, or the taking of corporate action by the Borrower in
furtherance of any such action; or
(f) The failure of the Borrower to cure a Borrowing Base
Deficiency as provided in Sections 8 and 9.19 of the Credit Agreement within two
(2) Business Days of actual knowledge of the Borrower or notice from a
Noteholder or the Trustee; or
(g) The breach by TWRI or the Borrower of any representation,
warranty, covenant or agreement in the Credit Agreement which is not remedied
within 30 days after notice of such breach from any party to a Warehouse
Facility Document; or
(h) Any material default under the Engagement Letter; or
(i) An Event of Master Servicer Termination occurs; or
(j) Any Change of Control in the ownership of TWRI; or
(k) Any materially adverse change in the business, operations,
financial condition, properties or prospects of TWRI and any material Affiliates
of TWRI, on a consolidated basis, in each case as determined by the Noteholders
in their sole discretion in good faith, or the existence of any other condition
which, in the Noteholders' sole determination, constitutes an impairment of TWRI
to perform its obligations under this Indenture or under the Credit Agreement;
or
(l) Any materially adverse change in the business, operations,
financial condition, properties or prospects of Worldmark in each case as
determined by the Noteholders in their sole discretion in good faith, or the
existence of any other condition which, in the Noteholders' sole determination,
constitutes an impairment of Worldmark to perform its obligations under any
agreements to which it is a party; or
(m) TWRI or any of its subsidiaries shall default in any
payment of principal or interest on any indebtedness of any lender which causes
or which is reasonably likely to result in the acceleration of any such
indebtedness to such lender or cause or permit the termination of any commitment
to lend to the TWRI or any of its subsidiaries.
(n) (i) 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 (x) utility or similar
easements or licenses which do not relate to borrowings by Worldmark or (y)
Liens that in the aggregate for all Resorts do not exceed $100,000), or (ii)
Worldmark 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, or (iii)
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 greater
than or equal to 10% from the number of Vacation Credits available for member
use on the Issuance Date, or (iv) Worldmark exchanges one of its present Resort
properties for another property that is worth fewer Vacation Credits than the
property so exchanged, or (v) Worldmark has interests in units at fewer than 20
developed Resorts.
SECTION 6.2. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default of the kind specified in Section
6.1(d) or Section 6.1(e) occurs, the unpaid principal amount of the Notes shall
automatically become due and payable at par together with all accrued and unpaid
interest thereon, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by the Borrower. If an Event of Default (other
than an Event of Default of the kind described in Section 6.1(d) or Section
6.1(e)) with respect to the Notes occurs and is continuing, then and in every
such case the Trustee shall, if so directed by the Noteholders, or the
Noteholders may, declare the unpaid principal amount of all the Notes to be due
and payable immediately, by a notice in writing to the Borrower (and to the
Trustee if given by Noteholders), and upon any such declaration such principal
amount shall become immediately due and payable together with all accrued and
unpaid interest thereon, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower. Interest on all
amounts due and payable under this Section 6.2 shall accrue interest at the rate
LIBOR plus 4.00%.
(b) At any time after such a declaration of acceleration has
been made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a like percentage of the Notes by written notice to the Borrower and the
Trustee, may rescind and annul such declaration and its consequences if:
(i) the Borrower has paid or deposited with the
Trustee a sum sufficient to pay:
(A) all Principal Payments on the Notes which have become
due otherwise than by such declaration of
acceleration and interest thereon from the date when
the same first became due until the date of payment
or deposit at the appropriate Note Interest Rate,
(B) all Interest Payments due with respect to the Notes
and, to the extent that payment of such interest is
lawful, interest upon overdue interest from the date
when the same first became due until the date of
payment or deposit at a rate per annum equal to the
appropriate Note Interest Rate, and
(C) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses,
disbursements, and advances of each of the Trustee
and the Master Servicer, its agents and counsel;
and
(ii) all Events of Default with respect to the Notes,
other than the non-payment of the Outstanding Principal Amount of the
Notes which become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 6.13.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 6.3. Remedies.
(a) If an Event of Default with respect to the Notes occurs
and is continuing of which a Responsible Officer of the Trustee has actual
knowledge, the Trustee shall immediately give notice to each Noteholder as set
forth in Section 7.2 and shall solicit such Noteholders for advice. The Trustee
shall then take such action as so directed by the Noteholders, subject to the
provisions of this Indenture.
(b) Following any acceleration of the Notes, the Trustee shall
have all of the rights, powers and remedies with respect to the Trust Estate as
are available to secured parties under the UCC or other applicable law, subject
to subsection (d) below. Such rights, powers and remedies may be exercised by
the Trustee in its own name as trustee of an express trust.
(c) (i) If an Event of Default specified in Section 6.1(a)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Borrower for the whole
amount of principal and interest remaining unpaid with respect to the Notes.
(i) (ii) If an Event of Default occurs and is continuing the Trustee,
at the instruction of the Noteholders, shall proceed to protect and
enforce its rights and the rights of the Noteholders by such
appropriate judicial or other 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. The Trustee shall notify the Borrower, the Master
Servicer and the Noteholders of any such action.
(d) If (i) the Trustee shall have received written
instructions from the Noteholders, to the effect that such Persons approve of or
request the liquidation of the Assets or (ii) upon an Event of Default set forth
in Section 6.1(d) or (e), the Trustee shall, direct the Master Servicer or its
successor, to the extent lawful, promptly sell, dispose of or otherwise
liquidate the Assets in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of competitive bids;
provided, however, that, upon an Event of Default set forth in Section 6.1(d) or
(e), the Noteholders may notify the Trustee that such liquidation shall not
occur. The Trustee may obtain a prior determination from any such conservator,
receiver or liquidator of the Borrower that the terms and manner of any proposed
sale, disposition or liquidation are commercially reasonable.
(e) Notwithstanding the foregoing provisions of Section 6.3,
if an Event of Default occurs and is continuing, the parties hereto agree that,
in addition to or in lieu of the other remedies described in this Section 6.3,
the Trustee, at the direction of the Noteholders may (i) amend the distribution
of Available Funds described in Section 3.4 hereof, provided that the Trustee
Fee and the Master Servicer Fee shall not be subordinate to Interest Payments
and Principal Payments, (ii) amend this Indenture as provided in Section 9.2(b)
to provide for reserve accounts or other mechanisms designed to provide
over-collateralization for the Noteholders, (iii) appoint a new Master Servicer
as provided in Section 5.1 hereof, or (iv) agree to waive such Event of Default
for a period of time as shall be determined by the Noteholders.
SECTION 6.4. Trustee May File Proofs of Claim. (a) In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower, or any other obligor upon the Notes, or the
property of the Borrower, or 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 or otherwise and irrespective of
whether the Trustee shall have made any demand on the Borrower for the payment
of overdue principal or interest) shall be entitled and empowered, by
intervention in such proceeding or otherwise:
(i) to file and prove a claim for the whole amount of
principal and interest owing and unpaid in respect of the Notes or any
amounts owing on the Trust Estate Receivables or the other assets
constituting the Trust Estate and to file such other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee and any predecessor Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the
Trustee and any predecessor Trustee, their agents and counsel) and of
the Noteholders allowed in such judicial proceeding;
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute
the same; and
(iii) to participate as a member, voting or otherwise,
of any official committee of creditors appointed in such matter;
and any custodian, receiver, liquidator, assignee, trustee, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Noteholder to make such payments to the Trustee and to pay to the Trustee
any amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee and any predecessor Trustee, their agents and counsel,
and any other amounts due the Trustee and any predecessor Trustee under Section
7.6.
(a)(b) 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, agreement, adjustment or composition
affecting the Notes or the rights of any Noteholder thereof or affecting the
Trust Estate Receivables or the other assets constituting the Trust Estate or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Indenture, the Notes, the
Trust Estate Receivables or the other assets constituting the Trust Estate may
be prosecuted and enforced by the Trustee without the possession of any of the
Notes or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provisions for
the payment of the reasonable compensation, expenses, disbursements and advances
of the Trustee and any predecessor Trustee, their agents and counsel, be for the
benefit of the Noteholders in respect of which such judgment has been recovered,
and pursuant to the priorities contemplated by Section 3.4.
SECTION 6.6. Application of Money Collected. Any money
collected by the Trustee pursuant to this Article 6 shall be deposited in the
applicable Collection Account or Accounts for disbursement in accordance with
the provisions of Article 3.
SECTION 6.7. Limitation on Suits. No Noteholder shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture or for any other remedy hereunder, unless:
(a) there is a continuing Event of Default and such Noteholder
has previously given written notice to the Trustee of a continuing Event of
Default;
(b) such Noteholder or Noteholders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be incurred
in compliance with such request;
(c) the Trustee, for 30 days after its receipt of such notice,
request and offer of indemnity, has failed to institute any such proceeding; and
(d) no direction inconsistent with such written request has
been given to the Trustee during such 30-day period by the Noteholders;
it being understood and intended that no one or more of such Noteholders 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 Noteholders, or to obtain or to seek to obtain priority or preference over
any other Noteholders or to enforce any right under this Indenture, except in
the manner herein provided and for the ratable benefit of all such Noteholders.
It is further understood and intended that so long as any portion of the Notes
remains Outstanding, TWRI shall not have any right to institute any proceeding,
judicial or otherwise, with respect to this Indenture (other than for the
enforcement of Section 3.4) or for the appointment of a receiver or trustee
(including without limitation a proceeding under the Bankruptcy Code), or for
any other remedy hereunder. Nothing in this Section 6.7 shall be construed as
limiting the rights of otherwise qualified Noteholders to petition a court for
the removal of a Trustee pursuant to Section 7.8 hereof.
SECTION 6.8. Unconditional Right of Noteholders to Receive
Principal and Interest.
Notwithstanding any other provision in this Indenture, other
than the provisions hereof limiting the right to recover amounts due on the
Notes to recoveries from the property of the allocated Trust Estate, the Holder
of any Note shall have the absolute and unconditional right to receive payment
of the principal of and interest on such Note on the maturities for such
payments, and such right shall not be impaired without the consent of such
Noteholder.
SECTION 6.9. Restoration of Rights and Remedies.
If the Trustee or any Noteholder has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Noteholder, then and in every such case, subject to any
determination in such proceeding, the Borrower, the Trustee and the Noteholders
shall be restored severally and respectively to their former positions hereunder
and thereafter all rights and remedies of the Trustee and the Noteholders
continue as though no such proceeding had been instituted.
SECTION 6.10. 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 2.4, no right or remedy herein conferred upon or reserved to the
Trustee or to the Noteholders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 6.11. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any 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 an acquiescence therein. Every right and remedy given by this Article
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 6.12. Control by Noteholders.
Except as may otherwise be provided in this Indenture, until
such time as the conditions specified in Sections 10.1(a)(i) and (ii) have been
satisfied in full, the Noteholders 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, with respect
to the Notes. Notwithstanding the foregoing,
(i) no such direction shall be in conflict
with any rule of law or with this Indenture;
(ii) the Trustee shall not be required to follow any
such direction which the Trustee reasonably believes might result in
any personal liability on the part of the Trustee for which the Trustee
is not adequately indemnified; and
(iii) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with any such
direction; provided that the Trustee shall give notice of any such
action to each Noteholder.
SECTION 6.13. Waiver of Events of Default.
(a) The Noteholders may, by one or more instruments in
writing, waive any Event of Default on behalf of all Noteholders hereunder and
its consequences, except a continuing Event of Default:
(i) in respect of the payment of the principal of or
interest on any Note (which may only be waived by the Holder of such
Note), or
(ii) in respect of a covenant or provision hereof
which under Article 9 cannot be modified or amended without the consent
of the Holder of each Outstanding Note affected (which only may be
waived by the Holders of all Outstanding Notes affected).
(b) A copy of each waiver pursuant to Section 6.13(a) shall be
furnished by the Borrower to the Trustee and each Noteholder. Upon any such
waiver, such Event of Default shall cease to exist and shall be deemed to have
been cured, for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Event of Default or impair any right consequent
thereon.
SECTION 6.14. Undertaking for Costs.
All parties to this Indenture agree (and each Holder of any
Note by its 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 shall not apply
to any suit instituted by the Trustee, to any suit instituted by any Noteholder,
or group of Noteholders, holding in the aggregate more than 10% of the then
Outstanding Principal Amount of the Notes, 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 maturities for such payments.
SECTION 6.15. Waiver of Stay or Extension Laws.
The Borrower 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 Borrower (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
allocated to the Notes.
SECTION 6.16. Sale of Trust Estate.
(a) The power to effect any sale of any portion of the Trust
Estate pursuant to Section 6.3 shall not be exhausted by any one or more sales
as to any portion of the Trust Estate remaining unsold, but shall continue
unimpaired until the entire Trust Estate so allocated shall have been sold or
all amounts payable on the Notes shall have been paid. The Trustee may from time
to time, upon directions in accordance with Section 6.12, postpone any public
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 sell to a third party the Trust Estate, or any portion thereof except
as permitted under Section 6.3(d).
(c) In connection with a sale of all or any portion of the
Trust Estate:
(i) any one or more Noteholders may bid for and
purchase the property offered for sale, and upon compliance with the
terms of sale may hold, retain, and possess and dispose of such
property, without further accountability, and any Noteholder may, in
paying the purchase money therefore, deliver in lieu of cash any
Outstanding Notes or claims for interest thereon for credit in the
amount that shall, upon distribution of the net proceeds of such sale,
be payable thereon, and the Notes, in case the amounts so payable
thereon shall be less than the amount due thereon, shall be returned to
the Noteholders after being appropriately stamped to show such partial
payment;
(ii) the Trustee shall execute and deliver an
appropriate instrument of conveyance prepared by the Master Servicer
transferring its interest without representation or warranty and
without recourse in any portion of the Trust Estate in connection with
a sale thereof;
(iii) the Trustee is hereby irrevocably appointed
attorney-in-fact of the Borrower 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;
(iv) 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 moneys; and
(v) The method, manner, time, place and terms of any
sale of all or any portion of the Trust Estate shall be commercially
reasonable.
ARTICLE 7.
THE TRUSTEE
SECTION 7.1. Certain Duties. (a) 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.
(a)(b) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture; but in the case of
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture, provided however, the Trustee shall not be required to verify or
recalculate the contents thereof.
(c) If an Event of Default or an Event of Master Servicer
Termination has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in their exercise, as a prudent Person would exercise or use
under the circumstances in the conduct of such Person's own affairs; provided,
however, that no provision in this Indenture shall be construed to limit the
obligations of the Trustee to provide notices under Section 7.2.
(d) 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.
(e) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) this Section shall not be construed to
limit the effect of Section 7.1(a) and (b);
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it shall be
proved that the Trustee shall have been negligent in ascertaining the
pertinent facts; and
(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 written direction of the Holders of the requisite
principal amount of the Outstanding Notes, or in accordance with any
written direction delivered to it under Section 6.2(a), relating to the
time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred
upon the Trustee, under this Indenture.
(f) 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 7.1.
(g) The Trustee makes no representations or warranties with
respect to the Assets or the validity or sufficiency of any assignment of the
Trust Estate Receivables to the Borrower or to the Trust Estate.
(h) Notwithstanding anything to the contrary herein, the
Trustee is not required to expend or risk its own funds or otherwise incur
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 to
believe that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
SECTION 7.2. Notice of Events of Default. The Trustee shall
promptly (but in any event within 5 Business Days) notify the Master Servicer,
and the Noteholders upon a Responsible Officer obtaining actual knowledge of any
event which constitutes an Event of Default or an Event of Master Servicer
Termination or would constitute an Event of Default or an Event of Master
Servicer Termination but for the requirement that notice be given or time elapse
or both; provided, further, that this Section 7.2 shall not limit the
obligations of the Trustee to provide notices expressly required by this
Indenture.
SECTION 7.3. Certain Matters Affecting the Trustee. Subject
to the provisions of Section 7.1:
(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, debenture,
note, other evidence of indebtedness or other 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 any Noteholders, the Master
Servicer, or the Borrower mentioned herein shall be in writing;
(c) Whenever in the performance of its duties hereunder 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 or Opinion of Counsel;
(d) The Trustee may consult with counsel and the advice of
such counsel or any Opinion of Counsel shall be deemed authorization in respect
of any action taken, suffered, or omitted by it hereunder in good faith and in
reliance thereon;
(e) Prior to the occurrence of an Event of Default or an Event
of Master Servicer Termination, or after the curing of all Events of Default or
Events of Master Servicer Termination which may have occurred, the Trustee shall
not be bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper document, unless
requested in writing so to do by the Noteholders; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the reasonable opinion of the Trustee, not reasonably assured to the Trustee
by the security afforded to it by the terms of this Indenture, the Trustee may
require reasonable indemnity against such cost, expense or liability as a
condition to so proceeding. The reasonable expense of every such examination
shall be paid by the Master Servicer or, if paid by the Trustee, shall be
reimbursed by the Master Servicer upon demand; and
(f) 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 or a custodian (which may be Affiliates of the Trustee) and
the Trustee shall not be liable for any acts or omissions of such agents,
attorneys or custodians appointed with due care by it hereunder.
SECTION 7.4. Trustee Not Liable for Notes or Receivables. (a)
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or any Warehouse Facility Document, the Notes (other than the
authentication thereof) or of any Receivable. The Trustee shall not be
accountable for the use or application by the Borrower of funds paid to the
Borrower in consideration of conveyance of the Receivables to the Trust Estate.
(a)(b) If the Trustee acts as Successor Servicer, the Trustee
shall have no responsibility or liability for or with respect to: the
validity of any security interest in any Vacation Credits; the
existence or validity of any Trust Estate Receivable, the validity of
the assignment of any Trust Estate Receivable to the Trust Estate or of
any intervening assignment; the review of any Trust Estate Receivable
or any Receivable File, the completeness of any Receivable File, the
receipt by the Custodian of any Trust Estate Receivable or Receivable
File (it being understood that the Trustee has not reviewed and does
not intend to review such matters); the performance or enforcement of
any Trust Estate Receivable; the compliance by the Master Servicer or
the Borrower with any covenant or the breach by the Master Servicer or
the Borrower of any warranty or representation made hereunder or in any
related document or the accuracy of any such warranty or
representation; the acts or omissions of the Master Servicer or any
Obligor; or any action of the Master Servicer taken in the name of the
Trustee.
SECTION 7.5. Trustee May Own Notes. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes with
the same rights as it would have if it were not Trustee.
SECTION 7.6. The Master Servicer to Pay Trustee's Fees and
Expenses. The Master Servicer agrees to reimburse the Trustee upon its request
for all agreed-upon third-party expenses, disbursements and advances incurred or
made by the Trustee in its capacity as such in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursement of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith. The
obligations of the Master Servicer under this Section 7.6 shall survive the
termination of this Indenture and the resignation or removal of the Trustee. The
compensation of the Trustee shall not be limited by any law on compensation of a
trustee of an express trust.
SECTION 7.7. Eligibility Requirements for Trustee. Other than
the initial Trustee, the Trustee hereunder shall at all times (a) be a
corporation, depository institution, or trust company organized and doing
business under the laws of the United States of America or any state thereof
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $250,000,000, (b) be subject to supervision or
examination by federal or state authority, (c) be capable of maintaining an
Eligible Bank Account and (d) have a long-term unsecured debt rating of not less
than Baa2 from the Rating Agencies, and shall be acceptable to the Noteholders.
If such institution publishes reports of condition at least annually, pursuant
to or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section 7.7, the combined capital and surplus of
such institution shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any time
the Trustee shall cease to be eligible in accordance with the provisions of this
Section 7.7, the Trustee shall resign immediately in the manner and with the
effect specified in Section 7.8.
SECTION 7.8. Resignation or Removal of Trustee. (a) The
Trustee may at any time resign and be discharged with respect to the Notes by
giving 90 days' written notice thereof to the Master Servicer, the Borrower, and
the Noteholders. Upon receiving such notice of resignation, the Master Servicer
shall promptly appoint a successor Trustee not objected to by the Noteholders
within 30 days after prior written notice, by written instrument, in
quintuplicate, one counterpart of which instrument shall be delivered to each of
the Borrower, the Master Servicer, the successor Trustee and the predecessor
Trustee. If no successor Trustee shall have been so appointed and have accepted
appointment within 90 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(a)(b) If at any time the Trustee shall cease to be eligible
in accordance with the provisions of Section 7.7 and shall fail to resign after
written request therefor by the Master Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or
a receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Master Servicer or the Noteholders may direct, and the Master Servicer shall
follow such direction and remove the Trustee. If it removes the Trustee under
the authority of the immediately preceding sentence, the Master Servicer shall
promptly appoint a successor Trustee not objected to by the Noteholders within
30 days after prior written notice, by written instrument, in quintuplicate, one
counterpart of which instrument shall be delivered to each of the Borrower, the
Master Servicer, the Noteholders, the successor Trustee and the predecessor
Trustee.
(c) The Trustee may be removed by the Master Servicer at any
time by giving written notice thereof to the Trustee and each of the Holders of
the Notes then outstanding. Such removal by the Master Servicer will become
effective unless the Holders of at least 51% of the principal amount of the
Notes then outstanding deliver a written statement to the Master Servicer
opposing such removal within 30 days following receipt of such notice of removal
from the Master Servicer.
(d) Any resignation or removal of the Trustee and appointment
of a successor Trustee pursuant to any of the provisions of this Section 7.8
shall not become effective until acceptance of appointment by the successor
Trustee as provided in Section 7.9.
SECTION 7.9. Successor Trustee. (a) Any successor Trustee
appointed as provided in Section 7.8 shall execute, acknowledge and deliver to
each of the Master Servicer, the Borrower, the Noteholders and to its
predecessor Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder with like effect as if originally named
a Trustee. The predecessor Trustee shall deliver or cause to be delivered to the
successor Trustee or its custodian any related documents and statements held by
it or its custodian hereunder; and the Master Servicer and the Borrower and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for the full and certain vesting and
confirmation in the successor Trustee of all such rights, powers, duties and
obligations.
(a)(b) In case of the appointment hereunder of a successor
Trustee with respect to the Notes, the Borrower, the retiring Trustee and each
successor Trustee with respect to the Notes shall execute and deliver an
indenture supplemental hereto wherein each successor Trustee shall accept such
appointment and which (i) shall contain such provisions as shall be necessary or
desirable to transfer and confirm to, and to vest in, each successor Trustee all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Notes to which the appointment of such successor Trustee relates, (ii) if
the retiring Trustee is not retiring with respect to all Notes, shall contain
such provisions as shall be deemed necessary or desirable to confirm that all
the rights, powers, trusts and duties of the retiring Trustee with respect to
the Notes as to which the retiring Trustee is not retiring shall continue to be
vested in the retiring Trustee, and (iii) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide for or facilitate
the administration of the Trust Estate hereunder by more than one Trustee, it
being understood that nothing herein or in such supplemental indenture shall
constitute such Trustees co-trustees of the same allocated trust and that each
such Trustee shall be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other such Trustee; and
upon the execution and delivery of such supplemental indenture the resignation
or removal of the retiring Trustee shall become effective to the extent provided
therein and each 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 with respect to the Notes to which the appointment of
such successor Trustee relates; but, on request of the Borrower or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee hereunder
with respect to the Notes to which the appointment of such successor Trustee
relates.
Upon request of any such successor Trustee, the Borrower shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor trustee all such rights, powers and trusts referred
to in the preceding paragraph.
(c) No successor Trustee shall accept appointment as provided
in this Section 7.9 unless at the time of such acceptance such successor Trustee
shall be eligible under the provisions of Section 7.7.
(d) Upon acceptance of appointment by a successor Trustee as
provided in this Section 7.9, the Master Servicer shall mail notice of the
succession of such Trustee hereunder to each Noteholder at its address as shown
in the Note Register. If the Master Servicer fails to mail such notice within 10
days after acceptance of appointment by the successor Trustee, the successor
Trustee shall cause such notice to be mailed at the expense of the Borrower and
the Master Servicer.
SECTION 7.10. Merger or Consolidation of Trustee. Any
corporation into which the Trustee may be merged or converted or with which it
may be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation shall be eligible
under the provisions of Section 7.7, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.
SECTION 7.11. Appointment of Co-Trustee or Separate Trustee.
(a) At any time or times for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust Estate may at the time be located or
in which any action of the Trustee may be required to be performed or taken, the
Trustee, the Master Servicer or the Holders of at least 51% of the Outstanding
Principal Amount of the Notes, by an instrument in writing signed by it or them,
may appoint, at the reasonable expense of the Trust Estate, one or more
individuals or corporations to act as separate trustee or separate trustees or
co-trustee, acting jointly with the Trustee, of all or any part of the Trust
Estate, to the full extent that local law makes it necessary for such separate
trustee or separate trustees or co-trustee acting jointly with the Trustee to
act. Notwithstanding the appointment of any separate or co-trustee, the Trustee
shall remain obligated and liable for the obligations of the Trustee under this
Indenture.
(b) The Trustee and, at the request of the Trustee, the Master
Servicer shall execute, acknowledge and deliver all such instruments as may be
required by the legal requirements of any jurisdiction or by any such separate
trustee or separate trustees or co-trustee for the purpose of more fully
confirming such title, rights, or duties to such separate trustee or separate
trustees or co-trustee. Upon the acceptance in writing of such appointment by
any such separate trustee or separate trustees or co-trustee, it, he, she or
they shall be vested with such title to the Trust Estate or any part thereof,
and with such rights, powers, duties and obligations as shall be specified in
the instrument of appointment, and such rights, powers, duties and obligations
shall be conferred or imposed upon and exercised or performed by the Trustee, or
the Trustee and such separate trustee or separate trustees or co-trustees
jointly with the Trustee subject to all the terms of this Indenture, except to
the extent that under any law of any jurisdiction in which any particular act or
acts are to be performed the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations shall be exercised and performed by such separate trustee or
separate trustees or co-trustee, as the case may be. Any separate trustee or
separate trustees or co-trustee may, at any time by an instrument in writing,
constitute the Trustee its attorney-in-fact and agent with full power and
authority to do all acts and things and to exercise all discretion on its behalf
and in its name. In any case any such separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, the title to the Trust Estate
and all assets, property, rights, power duties and obligations and duties of
such separate trustee or co-trustee shall, so far as permitted by law, vest in
and be exercised by the Trustee, without the appointment of a successor to such
separate trustee or co-trustee unless and until a successor is appointed.
(c) All provisions of this Indenture which are for the benefit
of the Trustee shall extend to and apply to each separate trustee or co-trustee
appointed pursuant to the foregoing provisions of this Section 7.11.
(d) Every additional trustee and separate trustee hereunder
shall, to the extent permitted by law, be appointed and act and the Trustee
shall act, subject to the following provisions and conditions: (i) all powers,
duties and obligations and rights conferred upon the Trustee in respect of the
receipt, custody, investment and payment of monies shall be exercised solely by
the Trustee; (ii) all other rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed and exercised or
performed by the Trustee and such additional trustee or trustees and separate
trustee or trustees jointly except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed, the
Trustee shall be incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations (including the holding
of title to the Properties in any such jurisdiction) shall be exercised and
performed by such additional trustee or trustees or separate trustee or
trustees; (iii) no power hereby given to, or exercisable by, any such additional
trustee or separate trustee shall be exercised hereunder by such trustee except
jointly with, or with the consent of, the Trustee; and (iv) no trustee hereunder
shall be personally liable by reason of any act or omission of any other trustee
hereunder.
If at any time, the Trustee shall deem it no longer necessary or
prudent in order to conform to such law, the Trustee shall execute and deliver
all instruments and agreements necessary or proper to remove any additional
trustee or separate trustee.
(e) Any request, approval or consent in writing by the Trustee
to any additional trustee or separate trustee shall be sufficient warrant to
such additional trustee or separate trustee, as the case may be, to take such
action as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section 7.11,
the powers of any additional trustee or separate trustee shall not exceed those
of the Trustee hereunder.
SECTION 7.12.. Paying Agent and Note Registrar Rights So long
as the Trustee is the Paying Agent and Note Registrar, the Paying Agent and Note
Registrar shall be entitled to the rights, benefits and immunities of the
Trustee as set forth in Article 7 to the same extent and as fully as though
named in place of the Trustee.
SECTION 7.13. No Obligation to make Advances. The
Trustee shall have no obligation to make Advances under the Credit Agreement.
ARTICLE 8.
COVENANTS
SECTION 8.1. Payment of Principal and Interest.
The Borrower will cause the due and punctual payment of the
principal of and interest on the Notes in accordance with the terms of the Notes
and this Indenture.
SECTION 8.2. Maintenance of Office or Agency; Chief
Executive Office.
(a) The Borrower will maintain at the Corporate Trust Office
an office or agency where Notes may be surrendered for registration of transfer
or exchange and where notices and demands to or upon the Borrower in respect of
the Notes and this Indenture may be served. The Borrower hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
(b) The Borrower will not change the location of its principal
place of business without giving the Trustee at least 60 Business Days' prior
written notice thereof.
SECTION 8.3. Money for Payments to Noteholders to be Held
in Trust.
(a) All payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Trust Accounts
pursuant to Section 3.4 or Section 6.6 shall be made on behalf of the Borrower
by the Trustee, and no amounts so withdrawn from the applicable Collection
Account for payments of Notes shall be paid over to the Borrower under any
circumstances except as provided in this Section 8.3, in Section 3.4 or Section
6.6.
(b) In making payments hereunder, the Trustee will hold all
sums held by it for the payment of amounts due with respect to the Notes in
trust for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided and pay such
sums to such Persons as herein provided.
(c) Except as required by applicable law, any money held by
the Trustee in trust for the payment of any amount due with respect to any Note
and remaining unclaimed for three years after such amount has become due and
payable to the Noteholder shall be discharged from such trust and, subject to
applicable escheat laws, and so long as no Event of Default has occurred and is
continuing, paid to the Borrower upon request; otherwise, such amounts shall be
redeposited in the Collection Account as Available Funds, and such Noteholder
shall thereafter, as an unsecured general creditor, look only to the Borrower
for payment thereof (but only to the extent of the amounts so paid to the
Borrower), and all liability of the Trustee with respect to such trust money
shall thereupon cease.
SECTION 8.4. Corporate Existence; Merger; Consolidation, etc.
(a) The Borrower will 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
entity in each jurisdiction in which such qualification is or shall be necessary
to protect the validity and enforceability of this Indenture, the Notes or any
of the Trust Estate Receivables.
(b) The Borrower shall at all times observe and comply in all
material respects with (i) all laws applicable to it, (ii) all requirements of
law in the declaration and payment of dividends on its capital stock, and (iii)
all requisite and appropriate corporate and other formalities (including without
limitation meetings of the Borrower's Board of Directors and, if required by
law, its charter or otherwise, meetings and votes of the shareholders of the
Borrower to authorize corporate action) in the management of its business and
affairs and the conduct of the transactions contemplated hereby.
(c) The Borrower shall not issue or register the transfer of
any of its common stock to any Person other than TWRI or an Affiliate of TWRI.
(d) The Borrower shall not (i) consolidate or merge with or
into any other Person or convey or transfer its properties and assets
substantially as an entirety to any other Person or (ii) commingle its assets
with those of any other Person.
SECTION 8.5. Protection of Trust Estate; Further Assurances.
The Borrower will from time to time execute and deliver all
such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance, and other
instruments, and will take such other action as may be necessary or advisable
to:
(i) Grant more effectively the Assets
comprising all or any portion of the Trust Estate;
(ii) maintain or preserve the lien of this Indenture
or carry out more effectively the purposes hereof;
(iii) publish notice of, or protect the validity of,
any Grant made or to be made by this Indenture and perfect the security
interest contemplated hereby in favor of the Trustee in each of the
Trust Estate Receivables and all other property included in the Trust
Estate;
(iv) enforce or cause the Master Servicer to enforce
any of the Trust Estate Receivables in accordance with the terms
hereof; and
(v) preserve and defend title to the Trust Estate
Receivables (including the right to receive all payments due or to
become due thereunder), the interests in the Properties, or other
property included in the Trust Estate and preserve and defend the
rights of the Trustee in the Trust Estate (including the right to
receive all payments due or to become due thereunder) against the
claims of all Persons and parties other than as permitted hereunder.
The Borrower, upon the Borrower's failure to do so, hereby designates the
Trustee and the Master Servicer its agent and attorney-in-fact to execute any
financing statement or continuation statement required pursuant to this Section
8.5; provided, however, that such designation shall not be deemed to create a
duty in the Trustee to monitor the compliance of the Borrower with the foregoing
covenants, and provided, further, that the duty of the Trustee to execute any
instrument required pursuant to this Section 8.5 shall arise only if a
Responsible Officer of the Trustee has actual knowledge of any failure of the
Borrower to comply with the provisions of this Section 8.5.
SECTION 8.6. Reserved.
SECTION 8.7. Additional Covenants.
(a) The Borrower will not:
(i) sell, transfer, exchange or otherwise dispose of
any portion of the Trust Estate except as expressly permitted by this
Indenture;
(ii) claim any credit on, or make any deduction from,
the principal of, or interest on, any of the Notes by reason of the
payment of any taxes levied or assessed upon any portion of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture or any Grant hereby to be impaired, or permit the lien of
this Indenture to be amended, hypothecated, subordinated, terminated or
discharged, or permit any Person to be released from any covenants or
obligations under this Indenture, except as may be expressly permitted
hereby, (B) permit any lien, charge, security interest, mortgage or
other encumbrance to be created on or to extend to or otherwise arise
upon or burden the Trust Estate or any part thereof or any interest
therein or the proceeds thereof other than the lien of this Indenture,
or (C) except as otherwise contemplated in this Indenture, permit the
lien of this Indenture not to constitute a valid first priority
security interest in the Trust Estate.
(b) Notice of Event of Default. Immediately upon becoming
aware of the existence of any condition or event which constitutes a Default or
an Event of Default, the Borrower shall deliver to the Trustee a written notice
describing its nature and period of existence and what action the Borrower is
taking or proposes to take with respect thereto.
(c) Report on Proceedings. Promptly upon the Borrower's
becoming aware of (i) any proposed or pending investigation of it by any
Governmental Authority or agency; or (ii) 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 Borrower, the Borrower shall
deliver to the Trustee a written notice specifying the nature of such
investigation or proceeding and what action the Borrower is taking or proposes
to take with respect thereto and evaluating its merits.
SECTION 8.8. Taxes.
The Borrower shall pay all Taxes of the Borrower when due and
payable or levied against the Borrower's assets, properties or income, including
any property that is part of the Trust Estate.
ARTICLE 9.
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures.
(a) The Borrower, by a Borrower Order, and the Trustee, 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:
(i) without the consent of any Noteholder; (x) to
correct or amplify the description of any property at any time subject
to the lien of this Indenture, or to better assure, convey and confirm
unto the Trustee any property subject or required to be subjected to
the lien of this Indenture; provided such action pursuant to this
clause (i) shall not adversely affect the interests of the Noteholders
in any respect; or
(y) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Notes and to add to or change any of the provisions of
this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more
than one Trustee, pursuant to the requirements of Section 7.9;
or
(z) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent
with any other provision herein, or to make any other
provisions with respect to matters or questions arising under
this Indenture; provided that such action pursuant to this
clause (z) shall not adversely affect the interests of the
Holders of Notes; or
(b) The Trustee shall promptly deliver, at least 5 Business
Days prior to the effectiveness thereof, to each Noteholder a copy of any
supplemental indenture entered into pursuant to this Section 9.1(a).
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders.
(a) With the written consent of the Noteholders delivered to
the Borrower and the Trustee, the Borrower, by a Borrower Order, 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
Noteholders under this Indenture; provided, that no supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby,
(i) change the maturity of any Note or the Principal
Payments or Interest Payments due or to become due on any Payment Date
with respect to any Note, or change the priority of payment thereof as
set forth herein, or reduce the principal amount thereof or the Note
Interest Rate thereon, or change the place of payment where, or the
coin or currency in which, any Note or the interest thereon is payable,
or impair the right to institute suit for the enforcement of any such
payment on or after the Maturity thereof;
(ii) reduce the percentage of the Outstanding
Principal Amount of the Notes, the consent of whose Noteholders is
required for any such supplemental indenture, for any waiver of
compliance with provisions of this Indenture or Events of Default and
their consequences, provided for in this Indenture;
(iii) modify any of the provisions of this Section or
Section 6.13 except to increase any percentage or fraction set forth
therein or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Noteholder;
(iv) modify or alter the provisions of the proviso to
the definition of the term "Outstanding"; or
(v) 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 any Noteholder of the
security afforded by the lien of this Indenture;
provided, no such supplemental indenture may modify or change any terms
whatsoever of the Indenture that could be construed as increasing the Borrower's
or TWRI's discretion hereunder.
(b) If an Event of Default has occurred and is continuing, as
provided in Section 6.3, the parties to this Indenture hereby agree to amend the
provisions of this Indenture at the direction of the Noteholders.
(c) The Trustee shall promptly deliver to each Noteholder a
copy of any supplemental indenture entered into pursuant to Section 9.2(a).
SECTION 9.3. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any supplemental indenture (a) pursuant to Section 9.1 of this Indenture or (b)
pursuant to Section 9.2 of this Indenture without the consent of each holder of
the Notes to the execution of the same, or the modifications thereby of the
trusts created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 7.1) shall be, fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any supplemental indenture which affects the Trustee's
own rights, duties, obligations, or immunities under this Indenture or
otherwise.
SECTION 9.4. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 9.5. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. New Notes so modified as to
conform, in the opinion of the Trustee and the Borrower, to any such
supplemental indenture may be prepared and executed by the Borrower and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
ARTICLE 10.
SATISFACTION AND DISCHARGE
SECTION 10.1. Satisfaction and Discharge of Indenture.
(a) This Indenture shall cease to be of further effect (except
as to any surviving rights of registration of transfer or exchange of Notes
herein expressly provided for), and the Trustee, on demand of and at the expense
of the Borrower, shall execute proper instruments (prepared by the Borrower)
acknowledging satisfaction and discharge of this Indenture, when the Borrower
and the Master Servicer have paid or caused to be paid all other sums payable
hereunder by the Borrower and the Master Servicer for the benefit of the
Noteholders and the Trustee; and the Borrower has delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with. At such time, the Trustee
shall deliver to the Borrower all cash, securities and other property held by it
as part of the Trust Estate other than funds deposited with the Trustee pursuant
to Section 10.1(a)(i)(B), for the payment and discharge of the Notes.
(b) Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Borrower to the Trustee under Section 7.6 and,
if money shall have been deposited with the Trustee pursuant to Section
10.1(a)(i)(B), the obligations of the Trustee under Section 10.2 and Section
8.3(c) shall survive.
SECTION 10.2. Application of Trust Money.
Subject to the provisions of Section 8.3(c), all money
deposited with the Trustee pursuant to Sections 10.1 and 8.3 shall be held in
trust and applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment to the Persons entitled thereto, of the principal and
interest for whose payment such money has been deposited with the Trustee.
SECTION 10.3. Trust Termination Date. Upon the full
application of (a) moneys deposited pursuant to this Article 10 or (b) proceeds
of the Assets pursuant to Sections 3.4 or 6.6, the Trust Estate created by this
Indenture shall be deemed to have terminated (the "Trust Termination Date").
ARTICLE 11.
REPRESENTATIONS AND WARRANTIES
SECTION 11.1. Representations and Warranties of the Borrower.
The Borrower represents and warrants to the Trustee and the Noteholders, as of
each Issuance Date and on each day until the discharge of this Indenture, all
the representations and warranties contained in Section as follows:
(a) The Borrower is a wholly-owned bankruptcy remote
subsidiary of TWRI Resorts, Inc. and is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business, and is in good standing in each jurisdiction in
which the nature of its business requires it to be so qualified and which
permits such qualification;
(b) The Borrower has the power and authority to own and convey
all of its properties and to execute and deliver this Indenture and the
Warehouse Facility Documents and to perform the transactions contemplated hereby
and thereby;
(c) The Borrower is operated in such a manner and is
constituted so that it would not be substantively consolidated in the bankruptcy
trust estate of any Affiliate, such that the separate existence of the Borrower
and any Affiliate would be disregarded, and to such end:
(i) the Borrower maintains separate records, books of
account and financial statements from those of TWRI and each other
Affiliate of TWRI;
(ii) the Borrower does not commingle any of its assets
or funds with those of TWRI or any of the other Affiliates of TWRI;
(iii) the Borrower maintains a separate board of
directors with at least one independent director and observes all
separate corporate formalities, and all decisions with respect to the
Borrower's business and daily operations have been and shall be
independently made by the officers of the Borrower pursuant to
resolutions of its board of directors;
(iv) other than contributions of capital, payment of
dividends and return of capital, no transactions have been entered into
between the Borrower and TWRI or between the Borrower and any of the
other Affiliates of TWRI except such transactions as are contemplated
by this Indenture and the Warehouse Facility Documents;
(v) except for such administration and collection and
functions as TWRI may perform on behalf of the Borrower and the Trust
Estate pursuant to this Indenture and the Warehouse Facility Documents,
the Borrower acts solely in its own name and through its own authorized
officers and agents and the Borrower does not act as agent of TWRI or
any other Person in any capacity;
(vi) except for any funds received from TWRI (or from
TWRI indirectly by way of any of the other Affiliates of TWRI) as a
capital contribution, the Borrower shall not accept for its own account
funds from TWRI or any of the other Affiliates of TWRI; and the
Borrower shall not allow TWRI or any of the other Affiliates of TWRI
otherwise to supply funds to, or guarantee any obligation of, the
Borrower;
(vii) the Borrower shall not guarantee, or otherwise
become liable with respect to, any obligation of TWRI or any of the
other Affiliates of TWRI; and
(viii) the Borrower shall at all times hold itself out
to the public under the Borrower's own name as a legal entity separate
and distinct from TWRI and the other Affiliates of TWRI.
(d) The Borrower is a special purpose corporation and has not
engaged, and does not presently engage and shall not engage, in any activity
other than the activities undertaken pursuant to this Indenture and the
Warehouse Facility Documents and contemplated hereby and thereby and activities
ancillary or incident thereto, and has no Debt other than the Notes;
(e) The execution, delivery and performance by the Borrower of
this Indenture, the Warehouse Facility Documents and the transactions
contemplated hereby and thereby, (i) have been duly authorized by all necessary
corporate or other action on the part of the Borrower, (ii) do not contravene or
cause the Borrower to be in default under (A) the Borrower's organizational
documents, (B) any contractual restriction contained in any indenture, loan or
credit agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on or affecting the Borrower or its property, or
(C) any law, rule, regulation, order, writ, judgment, award, injunction, or
decree applicable to, binding on or affecting the Borrower or its property, and
(iii) do not result in or require the creation of any Adverse Claim upon or with
respect to any of the property of the Borrower;
(f) This Indenture and the Warehouse Facility Documents have
each been duly executed and delivered on behalf of the Borrower;
(g) No consent of, or other action by, and no notice to or
filing with, any Governmental Authority or any other party, is required for the
due execution, delivery and performance by the Borrower of this Indenture or any
of the Warehouse Facility Documents or for the perfection of or the exercise by
the Trustee or the Noteholders of any of their rights or remedies thereunder
which have not been duly obtained;
(h) This Indenture and each other Warehouse Facility Document
is the legal, valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with its respective terms; except as such enforcement
may be limited by bankruptcy, insolvency, reorganization, receivership,
moratorium or other laws relating to or affecting the rights of creditors
generally, and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in law or in equity);
(i) There is no pending or, to the Borrower's best knowledge,
threatened action, suit or proceeding, nor any injunction, writ, restraining
order or other order of any nature against or affecting the Borrower, its
officers or directors, or the property of the Borrower, in any court or
tribunal, or before any arbitrator of any kind or before or by any Governmental
Authority (i) asserting the invalidity of this Indenture or any of the Warehouse
Facility Documents, (ii) seeking to prevent the sale and assignment of any Trust
Estate Receivable or the consummation of any of the transactions contemplated
thereby, (iii) seeking any determination or ruling that might materially and
adversely affect (A) the performance by the Borrower of this Indenture or any of
the Warehouse Facility Documents or the interests of the Noteholders, (B) the
validity or enforceability of this Indenture or any of the Warehouse Facility
Documents, (C) any Trust Estate Receivable, or (D) the Intended Tax
Characterization, or (iv) asserting a claim for payment of money adverse to the
Borrower or the conduct of its business or which is inconsistent with the due
consummation of the transactions contemplated by this Indenture or any of the
Warehouse Facility Documents;
(j) The principal place of business and chief executive office
of the Borrower are located at the address in the State of Washington indicated
in Section 12.4 and there are now no, and there have not been any, other
locations where the Borrower is located (as that term is used in the UCC) or
keeps Records except, after the date of this Indenture, as disclosed in writing
to the Trustee and the Noteholders and the Master Servicer at least 30 Business
Days prior to any such change;
(k) The legal name of the Borrower is as set forth in the
beginning of this Indenture and the Borrower has not changed its name since its
formation, and during such period, the Borrower did not use, nor does the
Borrower now use any tradenames, fictitious names, assumed names or "doing
business as" names;
(l) The Borrower does not have any Subsidiaries;
(m) The Borrower is solvent and will not become insolvent
after giving effect to the transactions contemplated by this Indenture and each
of the Warehouse Facility Documents; the Borrower's transfers of Assets to the
Trust Estate have been and will be made for reasonably equivalent value and fair
consideration; and the Borrower, after giving effect to the transactions
contemplated by this Indenture and each of the Warehouse Facility Documents,
will have an adequate amount of capital to conduct its business in the future;
and
(n) The Borrower has complied in all material respects with
all applicable laws, rules, regulations, and orders with respect to it, its
business and properties and all of the Assets.
SECTION 11.2. Representations and Warranties as to Each
Trust Estate Receivable. (a) With respect to the Variable Notes, each of the
Borrower and TWRI hereby make and repeat the representations and warranties in
Section 2.3 of the Credit Agreement.
(b) The Borrower and the Master Servicer each hereby
certifies that the representations and warranties contemplated in this Section
11.2 shall survive the transfer of the Trust Estate Receivables to the Trust
Estate.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.1. Indemnities of the Master Servicer.
(a) The Master Servicer agrees to indemnify (i) the Trust
Estate from, and hold it harmless against, any and all losses, liabilities,
damages, claims or expenses (including reasonable attorneys' fees of counsel)
arising as a result of the Master Servicer's acts or omissions (subject to the
administration standard set forth in Section 5.2(b)) in violation of this
Indenture and (ii) the Trustee, any separate trustee or co-trustee, if any,
their directors, officers, employees and agents, from, and hold it harmless
against, any and all losses, liabilities, damages, claims, expenses (including
attorney's fees and disbursements), fines or penalties, or judgments arising out
of or in connection with the performance by the Trustee, separate trustee, if
any, or co-trustee, if any, of its duties hereunder or in connection with the
Trust Estate, or the issuance of the Notes except to the extent the Trustee's,
separate trustee's or co-trustee's own bad faith, willful misconduct or
negligence has been judicially determined to have contributed to the loss,
liability, damage, claim or expense.
(b) This Section 12.1 shall survive the termination of this
Indenture or the resignation or removal of the Trustee in respect of rights
accrued prior to such resignation or removal.
SECTION 12.2. Officer's Certificate and Opinion of Counsel as
to Conditions Precedent.
Upon any request or application by the Borrower (or any other
obligor upon the Notes) to the Trustee to take any action under this Indenture,
the Borrower (or such other obligor) shall furnish to the Trustee:
(a) an Officer's Certificate (which shall include the
statements set forth in Section 12.3) stating that, in the opinion of the
signer, all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel (which shall include the statements
set forth in Section 12.3) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
SECTION 12.3. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(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 such Person, he has
made such examination or investigation as is necessary to enable him 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 or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 12.4. Notices. (a) All communications, instructions,
directions and notices to the parties thereto shall be (i) in writing (which may
be by telecopy, followed by delivery of original documentation within one
Business Day), (ii) effective when received and (iii) delivered or mailed first
class mail, postage prepaid to it at the following address:
If to the Borrower:
TW HOLDINGS II, INC.
9805 Willows Road
Redmond, Washington 98052
Attention: Timothy P. O'Neil
Facsimile Number: (425) 498-3067
Telephone Number: (425) 498-2561
If to the Master Servicer:
Trendwest Resorts, Inc.
9805 Willows Road
Redmond, Washington 98052
Attention: Timothy P. O'Neil
Facsimile Number: (425) 498-3062
Telephone Number: (425) 498-2561
If to the Trustee:
LaSalle National Bank
Corporate Trust Department
135 S. LaSalle Street
Suite 1625
Chicago, Illinois 60674
Attention: Asset-Backed Securities Group-
TW Holdings II
Facsimile Number: (312) 904-2084
Telephone Number: (312) 904-7807
If to the Custodian:
Sage Systems, Inc.
2135 112th Avenue, N.E., Suite 101
Bellevue, Washington 98004
Attention: Mack Hendrick
Facsimile Number: (425) 462-0264
Telephone Number: (425) 451-2484
with copies to:
Interval International
6262 Sunset Drive
Miami, Florida 33143
Attention: Paul Rishell
Facsimile Number: (800) 622-1861
or at such other address as the party may designate by notice to the other
parties hereto, which shall be effective when received.
(a)(b) All communications and notices pursuant hereto to a
Noteholder shall be in writing and delivered or mailed first class mail, postage
prepaid or overnight courier at the address shown in the Note Register. The
Trustee agrees to deliver or mail to each Noteholder upon receipt, all notices
and reports that the Trustee may receive hereunder and under any Warehouse
Facility Documents. Unless otherwise provided herein, the Trustee may consent to
any requests received under such documents or, at its option, follow the
directions of Noteholders within 30 days after prior written notice to the
Noteholders. All notices to Noteholders shall be sent simultaneously. Expenses
for such communications and notices shall be borne by the Master Servicer.
SECTION 12.5. No Proceedings. The Noteholders, the Master
Servicer and the Trustee each hereby agrees that it will not, directly or
indirectly institute, or cause to be instituted, against the Borrower or the
Trust Estate any proceeding of the type referred to in Section 6.1(e) so long as
there shall not have elapsed one year plus one day since the last maturity of
the Notes.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Indenture to be duly executed as of the day and year first above written.
TW HOLDINGS II, INC.,
as Borrower
By: _____________________________
Name:
Title:
TRENDWEST RESORTS, INC.,
as Master Servicer
By: _____________________________
Name:
Title:
SAGE SYSTEMS, INC.,
as Custodian
By: _______________________
Name:
Title:
LASALLE NATIONAL BANK,
as Trustee
By: _____________________________
Name:
Title:
<PAGE>
trust indenture
EXHIBIT A
FORM OF COLLATERAL ASSIGNMENT
<PAGE>
COLLATERAL ASSIGNMENT
COLLATERAL ASSIGNMENT, dated as of [DATE] between TW HOLDINGS II, INC.
(the "Pledgor") and LASALLE NATIONAL BANK, as Trustee (the "Trustee").
i. We refer to the Indenture (the "Indenture"), dated as of April 15,
1999, by and among the Pledgor, Trendwest Resorts, Inc., Sage Systems, Inc., as
Custodian, and the Trustee. All provisions of such Indenture are incorporated by
reference. All capitalized terms shall have the meanings set forth in the
Indenture.
ii. Pledgor does hereby pledge, transfer, assign, set over and convey
to the Trustee on behalf of the Noteholders and the Trustee does hereby accept,
a security interest in all right, title and interest of the Pledgor in, to and
under the Assets listed on Schedule 1 hereto and all other property constituting
Assets under the Indenture.
iii. Each of TWRI and the Pledgor does hereby certify: (a) the
representations and warranties of the Pledgor and TWRI set forth in Sections
11.1 and 11.2 of the Indenture are true and correct on and as of the date
hereof, before and after giving effect to the Transfer evidenced hereby and to
the application of the proceeds therefrom, as though made on and as of such
date; (b) no event has occurred, or would result from such Transfer or from the
application of the proceeds therefrom, which constitutes an Event of Default or
would constitute an Event of Default but for the requirement that notice be
given or time elapse or both; (c) each of TWRI and the Pledgor is in compliance
with each of its covenants set forth in the Indenture; and (d) the aggregate
Unpaid Principal Balance of the Receivables listed on Schedule 1 hereto to be
pledged to the Trustee pursuant to this Collateral Assignment is $[___].
IN WITNESS WHEREOF, the parties have caused this Collateral
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
TW HOLDINGS II, INC., as Pledgor
By:__________________________
Name:
Title:
LASALLE NATIONAL BANK, as Trustee
By:__________________________
Name:
Title:
<PAGE>
trust indenture
EXHIBIT B
FORM OF NOTE
<PAGE>
trust indenture
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. BY ITS ACCEPTANCE
HEREOF, EACH PURCHASER REPRESENTS AND AGREES THAT THIS NOTE MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT IN COMPLIANCE WITH THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS
UNDER STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
PROVISIONS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH
IN THE INDENTURE REFERRED TO HEREIN.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT AN EMPLOYEE BENEFIT PLAN, TRUST
OR ACCOUNT, WHETHER OR NOT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR DESCRIBED IN SECTION 4975(e)(1)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, INCLUDING AN INDIVIDUAL
RETIREMENT ACCOUNT, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY
REASON OF AN INVESTMENT IN SUCH ENTITY BY A PLAN, TRUST OR ACCOUNT DESCRIBED
ABOVE, OR (B) THE ACQUISITION AND HOLDING OF SUCH NOTES WILL BE COVERED BY A
DEPARTMENT OF LABOR CLASS EXEMPTION.
TW HOLDINGS II, INC.
NOTE
April [__], 1999
New York, New York
FOR VALUE RECEIVED, TW Holdings II, Inc., a Delaware
corporation (the "Borrower") hereby promises to pay to PRUDENTIAL SECURITIES
CREDIT CORPORATION (the "Holder") or its assigns, the principal sum of
seventy-five million ($75,000,000), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Indenture referred to below, and to pay interest on the
unpaid principal amount of this Note until paid in full, at the rates per annum
and on the dates provided in the Indenture (hereinafter defined) and the Credit
Agreement, dated as of April 15, 1999 (the "Credit Agreement") among the
Borrower, Trendwest Resorts, Inc. and Prudential Securities Credit Corporation.
The Maturity Date of this Note is as set forth in the Credit
Agreement.
By its holding of this Note, the Holder shall be deemed to
accept the terms of the Credit Agreement and the Indenture and agree to be bound
thereby.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to herein by manual signature, this Note shall
not be entitled to any benefit under the Indenture or be valid or obligatory for
any purpose.
This Note is one of a duly authorized issue of Notes of the
Borrower, limited in aggregate principal amount of $75,000,000, issued under the
Trust Indenture, dated as of April 15, 1999 (herein called the "Indenture"),
among the Borrower, Trendwest Resorts, Inc. ("TWRI"), Sage Systems, Inc., as
custodian (the "Custodian") and LaSalle National Bank, as trustee (the
"Trustee"), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Borrower, TWRI, the Custodian, the
Trustee and the Holders and of the terms upon which the Notes are authenticated
and delivered. Unless otherwise defined herein, all capitalized terms used
herein shall have the meanings set forth in Annex A of the Indenture.
This Note is secured by the pledge to the Trustee under the
Indenture of the Trust Estate and recourse is limited to the extent set forth in
the Indenture and the Credit Agreement. The amounts owed under this Note shall
not include any recourse to the Trustee or any affiliates thereof.
The Outstanding Principal Amount of this Note shall, at any
time, be equal to the outstanding amount of Advances made pursuant to the Credit
Agreement; therefore, the Outstanding Principal Amount of this Note shall
increase or decrease depending on Advances made to and Advances repaid by the
Borrower.
If certain Events of Default under the indenture have been
declared, the unpaid principal of the Notes may be declared immediately due and
payable in the manner and with the effect provided in the Indenture. Notice of
such declaration will be given by mail to Noteholders, as their names and
addresses appear in the Note Register, as provided in the Indenture. Upon
payment of such principal amount together with all accrued interest, the
obligations of the Borrower with respect to the payment of principal and
interest on this Note shall terminate.
The Indenture permits with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Noteholders under the Indenture
at any time by the Company and the Trustee with the consent of the Noteholders
of the percentages specified in the Indenture at the time Outstanding. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Notes, at the time Outstanding,
on behalf of all the Holders, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note issued upon the registration of transfer hereof or in exchange herefor or
in lieu hereof, whether or not notation of such consent or waiver is made upon
this Note.
Each Note may be issued only in registered form and only in
minimum denominations of at least $500,000 and integral multiples of $1,000 in
excess thereof; provided that the foregoing shall not restrict or prevent the
transfer in accordance with Section 2.3 of the Indenture of any Note having a
remaining Outstanding Principal Amount of other than an integral multiple of
$1,000, or the issuance of a single Note with a denomination less than $500,000.
The Borrower, the Trustee and any agent of the Borrower or the
Trustee may treat the Person in whose name this Note is registered as the owner
hereof for all purposes, whether or not this Note may be overdue, and neither
the Borrower, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture and this Note shall be deemed to be contracts
made under the laws of the State of New York and shall for all purposes be
governed by, and construed in accordance with, the laws of the State of New
York.
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this instrument to
be duly executed by the manual signature of its duly Authorized Officer.
Dated: April 15, 1999
TW HOLDINGS II, INC.
By: ____________________________
Name:
Title:
<PAGE>
Trustee's Certificate of Authentication
This is one of the Notes referred to in
the within mentioned Indenture.
LASALLE NATIONAL BANK,
as Trustee
By: ____________________________
Name:
Title:
<PAGE>
ASSIGNMENT FORM
If you the holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:__________________________
_____________________________________________________________________________
_____________________________________________________________________________
(Print or type name, address and zip code and social security or tax ID number
of assignee) and irrevocably appoint _________________, agent to transfer this
Note on the books of the Borrower. The agent may substitute another to act for
him.
Dated: ____________________
Signed:________________________________
(sign exactly as the name appears on the other side of this Note)
Signature Guarantee
Important Notice: When you sign your name to this Assignment Form without
filling in the name of your "Assignee" or "Attorney", this Note becomes fully
negotiable, similar to a check endorsed in blank. Therefore, to safeguard a
signed Note, it is recommended that you fill in the name of the new owner in the
"Assignee" blank. Alternatively, instead, of using this Assignment Form, you may
sign a separate "power of attorney" form and then mail the unsigned Note and the
signed "power of attorney" in separate envelopes. For added protection, use
certified or registered mail for a Note.
<PAGE>
trust indenture
EXHIBIT C
FORM OF RULE 144A TRANSFEREE LETTER
<PAGE>
RULE 144A TRANSFEREE LETTER
LaSalle National Bank
135 S. LaSalle Street
Suite 1625
Chicago, Illinois 60674
Ladies and Gentlemen:
We propose to purchase $[___] in original aggregate principal
amount of TW Holdings II, Inc. Notes (the "Notes"). The Notes were issued
pursuant to a Trust Indenture (as supplemented, the "Indenture") dated as of
April 15, 1999, among TW Holdings II, Inc. (the "Borrower"), Trendwest Resorts,
Inc., as Master Servicer ("TWRI"), Sage Systems, Inc., as Custodian (the
"Custodian") and LaSalle National Bank, as trustee (the "Trustee"). Capitalized
terms used herein but not otherwise defined shall have the same meaning as in
Annex A to the Indenture.
In connection with our proposed purchase of the Notes, we
agree to the following terms and conditions and make the representations and
warranties stated herein with the express understanding that they will be relied
upon by TWRI, the Borrower and the Trustee.
1. We understand that the Notes have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") or registered or
qualified under any state securities or "Blue Sky" laws and are being sold to us
in a transaction that is exempt from the registration requirements of the
Securities Act and the registration or qualification requirements of such state
laws.
2. We are (Check one):
___ (a) a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Securities
Act), in the case of a transfer of Notes to
be made in reliance on Rule 144A.
___ (b) an institutional investor that has such
knowledge and experience in financial and
business matters as to be capable of
evaluating the merits and risks of an
investment in the Notes and is able to bear
the economic risk of investment in the
Notes.
___ (c) an "accredited investor" as defined in Rule
501 promulgated under the Securities Act
that has such knowledge and experience in
financial and business matters as to be
capable of evaluating the merits and risks
of investment in the Notes and is able to
bear the economic risk of investment in the
Notes.
4. We agree that, to the extent that Section 2(a) of this
letter is applicable, that the Notes will not be transferred unless such
transfer is made in reliance on Rule 144A or unless some other exemption from
the registration requirements of the Securities Act, or any applicable state
securities law, is available.
5. To the extent that Section 2(b) or (c) of this letter is
applicable, that we are acquiring the Notes (i) solely for investment purposes
for our own account or for accounts as to which we exercise sole investment
discretion and not with a view to any resale or distribution of the Notes in
whole or in part, or (ii) otherwise for purposes which will not constitute a
distribution of securities under the Securities Act, or under any state
securities of "Blue Sky" laws subject, nevertheless, to the understanding that
disposition of our property shall at all times be and remain within our control,
and under no circumstances will we attempt to sell, pledge, hypothecate or
otherwise transfer all or any portion of our interest in the Notes except in
accordance with the terms of the Notes and the Indenture.
6. We agree not to sell the Notes in whole or in part, unless
the subsequent purchaser agrees to be subject to the same representations and
warranties as were applicable to us in acquiring the Notes.
7. We understand that each of the Notes shall bear a legend to
substantially the following effect:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. BY ITS
ACCEPTANCE HEREOF, EACH PURCHASER REPRESENTS AND AGREES THAT THIS NOTE MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT IN COMPLIANCE WITH
THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS
UNDER STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
PROVISIONS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH
IN THE INDENTURE REFERRED TO HEREIN.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED
UNLESS THE TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT AN EMPLOYEE BENEFIT
PLAN, TRUST OR ACCOUNT, WHETHER OR NOT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, INCLUDING
AN INDIVIDUAL RETIREMENT ACCOUNT, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
PLAN ASSETS BY REASON OF AN INVESTMENT IN SUCH ENTITY BY A PLAN, TRUST OR
ACCOUNT DESCRIBED ABOVE, OR (B) THE ACQUISITION AND HOLDING OF SUCH NOTES WILL
BE COVERED BY A DEPARTMENT OF LABOR CLASS EXEMPTION.
8. We understand that there is no public market for the Notes
and it is unlikely that such market will develop.
9. We are authorized to invest in the Notes.
10. We certify that, in acquiring the Notes, we have complied
with any applicable guidelines or regulations for or limitations on investments
established by each regulatory agency or body, if any, which has jurisdiction
over investments made by us and that our acquisition and retention of the Notes
will not violate the limitations on possession contained in any such guidelines,
regulations or limitations.
11. We further agree to be bound by all of the terms and
conditions of ownership of the Notes contained in the Indenture, as the same may
be amended from time to time.
Very truly yours,
[TRANSFEREE]
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF INVESTOR LETTER
<PAGE>
INVESTOR LETTER
LaSalle National Bank
135 S. LaSalle Street
Suite 1625
Chicago, Illinois 60674
Ladies and Gentlemen:
We propose to purchase $[___] in original aggregate principal
amount of TW Holdings II, Inc. Notes (the "Notes"). The Notes were issued
pursuant to a Trust Indenture (as supplemented, the "Indenture") dated as of
April 15, 1999, among TW Holdings II, Inc. (the "Borrower"), Trendwest Resorts,
Inc., as Master Servicer ("TWRI"), Sage Systems, Inc., as Custodian (the
"Custodian") and LaSalle National Bank, as trustee (the "Trustee"). Capitalized
terms used herein but not otherwise defined shall have the same meaning as in
Annex A to the Indenture.
In connection with our proposed purchase of the Notes, we
agree to the following terms and conditions and make the representations and
warranties stated herein with the express understanding that they will be relied
upon by TWRI, the Borrower and the Trustee.
1. We understand that the Notes have not been registered under
the Securities Act of 1933, as amended (the "Securities Act") or registered or
qualified under any state securities or "Blue Sky" laws and are being sold to us
in a transaction that is exempt from the registration requirements of the
Securities Act and the registration or qualification requirements of such state
laws.
2. We are (Check one):
(a) a "Qualified Institutional Buyer" (as
defined in Rule 144A under the Securities
Act), in the case of a transfer of Notes to
be made in reliance on Rule 144A.
(b) an institutional investor that has such
knowledge and experience in financial and
business matters as to be capable of
evaluating the merits and risks of an
investment in the Notes and is able to bear
the economic risk of investment in the
Notes.
(c) an "accredited investor" as defined in Rule
501 promulgated under the Securities Act
that has such knowledge and experience in
financial and business matters as to be
capable of evaluating the merits and risks
of investment in the Notes and is able to
bear the economic risk of investment in the
Notes.
4. We agree that, to the extent that Section 2(a) of this
letter is applicable, that the Notes will not be transferred unless such
transfer is made in reliance on Rule 144A or unless some other exemption from
the registration requirements of the Securities Act, or any applicable state
securities law, is available.
5. To the extent that Section 2(b) or (c) of this letter is
applicable, that we are acquiring the Notes (i) solely for investment purposes
for our own account or for accounts as to which we exercise sole investment
discretion and not with a view to any resale or distribution of the Notes in
whole or in part, or (ii) otherwise for purposes which will not constitute a
distribution of securities under the Securities Act, or under any state
securities of "Blue Sky" laws subject, nevertheless, to the understanding that
disposition of our property shall at all times be and remain within our control,
and under no circumstances will we attempt to sell, pledge, hypothecate or
otherwise transfer all or any portion of our interest in the Notes except in
accordance with the terms of the Notes and the Indenture.
6. We agree not to sell the Notes in whole or in part, unless
the subsequent purchaser agrees to be subject to the same representations and
warranties as were applicable to us in acquiring the Notes.
7. We understand that each of the Notes shall bear a legend to
substantially the following effect:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. BY ITS
ACCEPTANCE HEREOF, EACH PURCHASER REPRESENTS AND AGREES THAT THIS NOTE MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT IN COMPLIANCE WITH
THE REGISTRATION PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE PROVISIONS
UNDER STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH
PROVISIONS. THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN CONDITIONS SET FORTH
IN THE INDENTURE REFERRED TO HEREIN.
NEITHER THIS NOTE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED
UNLESS THE TRANSFEREE REPRESENTS THAT EITHER (A) IT IS NOT AN EMPLOYEE BENEFIT
PLAN, TRUST OR ACCOUNT, WHETHER OR NOT SUBJECT TO TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR DESCRIBED IN
SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, INCLUDING
AN INDIVIDUAL RETIREMENT ACCOUNT, OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE
PLAN ASSETS BY REASON OF AN INVESTMENT IN SUCH ENTITY BY A PLAN, TRUST OR
ACCOUNT DESCRIBED ABOVE, OR (B) THE ACQUISITION AND HOLDING OF SUCH NOTES WILL
BE COVERED BY A DEPARTMENT OF LABOR CLASS EXEMPTION.
8. We understand that there is no public market for the Notes
and it is unlikely that such market will develop.
9. We are authorized to invest in the Notes.
10. We certify that, in acquiring the Notes, we have complied
with any applicable guidelines or regulations for or limitations on investments
established by each regulatory agency or body, if any, which has jurisdiction
over investments made by us and that our acquisition and retention of the Notes
will not violate the limitations on possession contained in any such guidelines,
regulations or limitations.
11. We further agree to be bound by all of the terms and
conditions of ownership of the Notes contained in the Indenture, as the same may
be amended from time to time.
Very truly yours,
[INVESTOR]
By: ____________________________
Name:
Title:
<PAGE>
EXHIBIT E
FORM OF SERVICER REPORT
<PAGE>
EXHIBIT F
FORM OF REQUEST FOR RELEASE
<PAGE>
REQUEST FOR RELEASE OF DOCUMENTS
SAGE SYSTEMS, INC.
2135 112th Avenue, N.E., Suite 101
Bellevue, Washington 98004
Re: Indenture dated as of April 15, 1999, among TW Holdings II, Inc.,
as Borrower, Trendwest Resorts, Inc., as Master Servicer, Sage Systems, Inc., as
Custodian and LaSalle National Bank, as Trustee (the "Indenture")
Pursuant to Section 4.6 and 4.9(c) of the above-referenced
Indenture, in connection with the Receivables indicated on Schedule A hereto, we
request the release of the related Receivable Documents [specify documents] for
the reason indicated below.
Capitalized terms used but not defined herein shall have the
meanings given them in "Trendwest Warehouse Facility Definitions" attached as
Annex A to the Indenture.
Loan Number:
Reason for Requesting Release (check all that apply)
___ 1. Liquidation (Section 4.6(a)(i))
___ 2. Breach of representation and warranty (Section 4.6(a)(ii))
___ 3. Missing Receivable Documents (Section 4.6(a)(iii))
___ 4. Failure to file financing statements (Section 4.6(a)(iv))
___ 5. Cease to be an Eligible Receivable
___ 6. Paid in Full
___ 7. Upgrade
LASALLE NATIONAL BANK,
By:___________________________
Name:
Title:
Release consented to:
[NOTEHOLDERS]
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE A
RECEIVABLES TO BE RELEASED
<PAGE>
trust indenture
EXHIBIT G
FORM OF RECEIPT
<PAGE>
RECEIPT
RECEIPT NO. [Date]
Re: Indenture dated as of April 15, 1999, among TW Holdings II, Inc.,
as Borrower, Trendwest Resorts, Inc., as Master Servicer, Sage Systems, Inc., as
Custodian and LaSalle National Bank, as Trustee (the "Indenture")
Ladies and Gentlemen:
In accordance with the provisions of Section 4.8 of the
above-referenced Indenture, the undersigned, as Custodian, hereby certifies that
as to each Receivable described in the Schedule of Receivables, a copy of which
is attached hereto, it has reviewed each Receivable Document and has determined
that (i) all documents required to be delivered to it pursuant to the Indenture
are in its possession, and (ii) based on its examination of the foregoing
documents, such documents appear regular on their face and relate to the
appropriate Receivable and none of the Receivable Documents contains evidence of
any claims, liens, security interests or encumbrances (other than the Lien of
the Indenture), and (iii) the information contained in the Schedule of
Receivables matches the related information in the Receivable Documents.
The Custodian hereby confirms that it is holding each such
Receivable Document as agent and bailee of the Trustee, as trustee for the
Noteholders, pursuant to the terms of the Indenture. The Custodian hereby
confirms it will act in accordance with the standard of care standard provided
in the Indenture and under no circumstances shall the Custodian (i) deliver
possession of any Receivable Document to the Borrower or any other Person, or
(ii) take any directions with respect to any Receivable Documents from the
Borrower or any other Person, without the express written consent of the Trustee
or the Noteholders.
SAGE SYSTEMS, INC.,
as Custodian
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE A TO RECEIPT
SCHEDULE OF RECEIVABLES
<PAGE>
TRENDWEST WAREHOUSE FACILITY DEFINITIONS
"Act" shall mean, with respect to any Noteholder, as defined
in Section 1.4 of the Indenture.
"Advances" means the advances provided for by Section 1.1 of
the Credit Agreement.
"Adverse Claim" shall mean any claim of ownership or any lien,
security interest, title retention, trust or other charge or encumbrance, or
other type of preferential arrangement having the effect or purpose of creating
a lien or security interest, other than the interests created under this
Indenture in favor of the Trustee and the Noteholders.
"Affiliate" shall mean any Person: (a) which directly or
indirectly controls, or is controlled by, or is under common control with such
Person; (b) which directly or indirectly beneficially owns or holds five percent
(5%) or more of the voting stock of such Person; or (c) five percent (5%) or
more of the voting stock of which is directly or indirectly beneficially owned
or held by such Person. The term "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.
"Assets" shall mean each Trust Estate Receivable, including
any Substitute Receivables (but excluding any such loan which has been released
from the lien of the Indenture pursuant to the terms hereof), and includes,
without limitation, (a) the related Assignment, (b) all security interests or
liens and property subject thereto from time to time purporting to secure
payment by the Obligor thereunder, including without limitation, the Vacation
Credits, (c) all guarantees, indemnities and warranties, certificates of title
or other title documentation and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such Trust Estate
Receivable, (d) all collections and all related Receivable Documents, Receivable
Files and records with respect to the foregoing, and (e) all proceeds of any of
the foregoing.
"Assignee" shall have the meaning set forth in Section
7.1(b) of the Credit Agreement.
"Assignment" shall mean collectively, with respect to any
Trust Estate Receivable, the related Sale Assignment and any Collateral
Assignment.
"Assignment Date" shall mean each date when Trust Estate
Receivables are transferred to the Trust Estate.
"Authorized Officer" means, with respect to TWRI or the
Borrower, any officer of TWRI or the Borrower, as the case may be, who is
authorized to act for TWRI or the Borrower, as the case may be, in matters
relating to transactions contemplated by the Credit Agreement or the Indenture.
"Available Facility Amount" on any date of determination,
shall mean (a) the Commitment, minus (b) the principal amount outstanding of all
Advances on such date.
"Available Funds" means all funds held in the Collection
Account as of the end of any Due Period.
"Board" shall mean, with respect to any Person, its board of
directors or, if it does not have a board of directors, its governing body which
performs the same duties as a board of directors.
"Borrower" shall mean TW Holdings II, Inc., a Delaware
corporation.
"Borrower Order" or "Borrower Request" shall mean a written
order or request delivered to the Trustee and signed by an Authorized Officer of
the Borrower.
"Borrowing Base" shall mean, an amount equal to the lesser of
90% of (i) the aggregate Unpaid Principal Balance of Trust Estate Receivables
which are Eligible Receivables, and (ii) the market value of such Eligible
Receivables as determined solely by PSI.
"Borrowing Base Deficiency" shall have occurred on any date in
which the Outstanding Principal Amount of the Notes exceeds the Borrowing Base.
"Borrowing Notice" shall have the meaning set forth in Section
1.3 of the Credit Agreement.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions in New York, New York, Seattle,
Washington, or in the city and State where the Trustee's principal offices are
located, are authorized or obligated by law, executive order or governmental
decree to be closed.
"Change of Control" shall have occurred with respect to TWRI
if JELD WEN inc. no longer holds a majority of the common stock of TWRI.
"Charge-off Factor" means, with respect to any Due Period, a
fraction of which the numerator is 365 and the denominator is the number of days
in such Due Period.
"Charge-off Rate" means, as of any Payment date, the average
of the Monthly Charge-off Rates for the three Due Periods immediately preceding
the Due Period in which such Payment Date occurs.
"Clearing Account" shall be as defined in Section 5.3 of the
Indenture.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time and any successor statute, together with the rules and
regulations thereunder.
"Collateral Assignment" shall mean a certificate of assignment
by the Borrower to the Trustee substantially in the form of Exhibit A to the
Indenture giving notice of, and evidencing, the pledge of Receivables and the
other Assets by the Borrower to the Trustee on behalf of the Trust Estate.
"Collection Account" shall have the meaning assigned to such
term in Section 3.2 of the Indenture.
"Commission" shall mean the Securities and Exchange
Commission.
"Commitment" shall mean the obligation of the Lender to make
Advances in an aggregate amount equal to $75,000,000, to the extent set forth in
the Warehouse Facility Documents.
"Commitment Termination Date" shall mean the earlier of (i)
the Maturity Date, or (ii) the occurrence of an Event of Default.
"Consolidated Charge-off Rate" means, as of any Payment Date,
the average of the Consolidated Monthly Charge-off Rates for the three Due
Periods immediately preceding the Due Period in which such Payment Date occurs.
"Consolidated Defaulted Receivable Amount" means, as of any
Payment Date, a fraction, expressed as a percentage, the numerator of which is
the Unpaid Principal Balance of all TWRI Receivables that were Defaulted
Receivables as of the last day of the related Due Period, and the denominator of
which is the Unpaid Principal Balance of all TWRI Receivables as of the last day
of such Due Period.
"Consolidated Delinquency Rate Amount" means, as of any
Payment Date, a fraction, expressed as a percentage, the numerator of which is
the Unpaid Principal Balance of all TWRI Receivables in respect of which a
payment of principal or interest was more than 30 days past due as of the last
day of the related Due Period, and the denominator of which is the Unpaid
Principal Balance of all TWRI Receivables as of the last day of such Due Period.
"Consolidated Monthly Charge-off Rate" means, with respect of
any Due Period, a fraction, expressed as a percentage on a per annum basis, the
numerator of which is the product of (x) the Charge-off Factor for such Due
Period and (y) the Unpaid Principal Balance of all TWRI Receivables that were
charged-off during such Due Period, and the denominator of which is the average
outstanding principal balance of all TWRI Receivables for each day in such Due
Period.
"Corporate Trust Office" shall mean the office of the Trustee
at which at any particular time its corporate trust business shall be
principally administered, which office at the date of the execution of the
Indenture is located at the address set forth in Section 12.4 of the Indenture.
"Credit Agreement" shall mean the credit agreement, dated as
of April 15, 1999, by and among the Borrower, TWRI, and the Lender.
"Credit and Collection Policies" shall mean TWRI's credit
extension procedures and policies and collection practices described in Exhibit
B of the Credit Agreement.
"Custodian" shall be Sage Systems, Inc, a Washington
corporation.
"Cut-off Date" shall mean with respect to Trust Estate
Receivables financed on the Initial Funding Date, April 7, 1999 and, with
respect to subsequent Trust Estate Receivables, as shall be mutually agreed upon
by the Borrower, the Trustee and the Lender.
"Debt" shall mean for any Person, (a) indebtedness of such
Person for borrowed money or credit extended, (b) obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations of such Person to pay the deferred purchase price of property or
services, (d) obligations of such Person as lessee under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (e)
obligations secured by any lien or other charge upon property or assets owned by
such Person, even though such Person has not assumed or become liable for the
payment of such obligations, (f) obligations of such Person under direct or
indirect guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred to in
clauses (a) through (e) above, and (g) liabilities in respect of unfunded vested
benefits under plans covered by ERISA. For the purposes hereof, the term
"guarantee" shall include any agreement, whether such agreement is on a
contingency or otherwise, to purchase, repurchase or otherwise acquire Debt of
any other Person, or to purchase, sell or lease, as lessee or lessor, property
or services, in any such case primarily for the purpose of enabling another
Person to make payment of Debt, or to make any payment (whether as an advance,
capital contribution, purchase of an equity interest or otherwise) to assure a
minimum equity, asset base, working capital or other balance sheet or financial
condition, in connection with the Debt of another Person, or to supply funds to
or in any manner invest in another Person in connection with Debt of such
Person.
"Default" shall mean any event or condition that would become
an Event of Default after notice or passage of time or both.
"Defaulted Receivable" means any Trust Estate Receivable in
respect of which (i) the related Obligor has failed to pay when due any amounts
due in respect thereof which failure continues for 90 days or more; (ii) the
Obligor has failed to perform any term or covenant on its part to be performed
under any related Receivable Document which failure continues for 90 days or
more, if the effect of such failure is to accelerate or to permit (with or
without the giving of notice) the acceleration of the maturity of such
Receivable; (iii) the related Obligor is the subject of a petition in
bankruptcy, either voluntary or involuntary, or in any other proceeding under
the federal bankruptcy laws or makes an assignment for the benefit of creditors;
(iv) any liquidation, foreclosure or similar proceedings have begun; or (v) the
Master Servicer has determined, in accordance with the procedures and standards
set forth in the Indenture and in the Credit and Collection Policies, that
eventual payment in full is unlikely.
"Defaulted Receivable Amount" means, as of any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the Unpaid
Principal Balance of all Trust Estate Receivables that were Defaulted
Receivables as of the last day of the related Due Period and the denominator of
which is the Unpaid Principal Balance of all Trust Estate Receivables as of the
last day of such Due Period.
"Delinquency Rate Amount" means, as of any Payment Date, a
fraction, expressed as a percentage, the numerator of which is the Unpaid
Principal Balance of all Trust Estate Receivables in respect of which a
principal or interest payment was more than 30 days past due as of the last day
of the related Due Period and the denominator of which is the Unpaid Principal
Balance of all Trust Estate Receivables (other than Defaulted Receivables) as of
the last day of such Due Period.
"Deposit Date" shall mean the Business Day immediately
preceding each related Payment Date.
"Determination Date" shall mean, with respect to a Payment
Date, the tenth day of the related calendar month (unless such day is not a
Business Day, then the next day that is a Business Day).
"Dollars" or "$" shall mean the lawful currency of the United
States of America, and in relation to any payment, same day or immediately
available funds.
"Due Period" shall mean, (a) with respect to the initial Due
Period, the month of April 1999, and (b) thereafter, with respect to any Payment
Date, the period commencing on the first day of the calendar month preceding the
calendar month in which such Payment Date occurs and ending on the last day of
the calendar month preceding the calendar month in which such Payment Date
occurs.
"Eligible Bank Account" shall mean a segregated account, which
may be an account maintained with the Trustee, which is either (a) maintained
with a depository institution or trust company whose long-term unsecured debt
obligations are rated at least BBB+ by Standard & Poor's and Baa-1 by Moody's
and whose short-term unsecured obligations are rated at least A-1 by Standard &
Poor's and P-1 by Moody's; or (b) a trust account or similar account maintained
with a federally or state chartered depository institution subject to
regulations regarding fiduciary funds on deposit substantially similar to 12
C.F.R. 9.10(b).
"Eligible Investment" shall mean one or more of the following:
(a) obligations of, or guaranteed as to timely payment of principal and interest
by, the United States or any agency or instrumentality thereof when such
obligations are backed by the full faith and credit of the United States;
(b) repurchase agreements (including those with the Trustee as a counterparty)
on obligations specified in clause (a) maturing not more than one month from the
date of acquisition thereof, provided that the long-term unsecured obligations
of the party agreeing to repurchase such obligations are at the time rated by a
Rating Agency in one of the three highest rating categories (without regard to
numerical modifiers) available from a Rating Agency; and provided, further, that
the short-term debt obligations of the party agreeing to repurchase shall be
rated in the highest rating category (without regard to numerical modifiers) by
a Rating Agency;
(c) federal funds, certificates of deposit, time deposits and bankers'
acceptances, each of which shall not have an original maturity of more than 90
days, of any depository institution or trust company incorporated under the laws
of the United States or any state; provided that the long-term unsecured debt
obligations of such depository institution or trust company at the date of
acquisition thereof have been rated by a Rating Agency in one of the three
highest rating categories (without regard to numerical modifiers) available from
a Rating Agency; and provided, further, that the short-term obligations of such
depository institution or trust company shall be rated in the highest rating
category (without regard to numerical modifiers) by a Rating Agency;
(d) commercial paper or commercial paper funds (having original maturities of
not more than 90 days) of any corporation incorporated under the laws of the
United States or any state thereof; provided that any such commercial paper or
commercial paper funds shall be rated in the highest short-term rating category
(without regard to numerical modifiers) by a Rating Agency; and
(e) any no-load money market fund rated in the highest short-term rating
category or equivalent highest long-term rating category (without regard to
numerical modifiers) by a Rating Agency;
provided that, Eligible Investments purchased from funds in the Eligible Bank
Accounts shall include only such obligations or securities that either may be
redeemed daily or mature no later than the Business Day next preceding the next
Payment Date; and provided, further, that no instrument shall be an Eligible
Investment if such instrument evidences a right to receive only interest
payments with respect to the obligations underlying such instrument. Eligible
Investments may include those Eligible Investments with respect to which the
Trustee or an Affiliate thereof provides services.
"Eligible Receivable" shall mean, for any date of
determination, any Receivable as to which the representations and warranties set
forth in Section 2.3(a) of the Credit Agreement are true and correct as of the
related Funding Date and for which the Custodian has delivered a Receipt
pursuant to the Indenture; provided, however, any Receivable (i) for which
payments are delinquent for 60 or more days on such date of determination, or
(ii) which is a Defaulted Receivable shall not be an Eligible Receivable.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Event of Default" shall have the meaning assigned thereto in
Sections 6.1 of the Indenture.
"Event of Master Servicer Termination" shall mean each of
the events described in Section 5.10 of the Indenture.
"Event of Purchase Termination" shall have the meaning
specified in Section 7 of the Receivable Sale Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Executive Officer" with respect to a Person shall mean the
Chief Executive Officer, President, Chief Operating Officer or Chief Financial
Officer.
"Foreign Obligor" means an obligor of a Receivable who is not
a resident of, and is not making payments from, the "United States" (as defined
in Section 7701(a)(9) of the Code).
"Funding Date" shall have the meaning set forth in Section 1.2
of the Credit Agreement.
"GAAP" shall mean, as of the date of any determination with
respect thereto, generally accepted accounting principles as understood and
applied in the United States at the time in question.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Grant" shall mean grant, bargain, convey, assign, transfer,
mortgage, pledge, create and grant a security interest in and right of set-off
against, deposit, set over and confirm. The Grant of the Trust Estate effected
by the Indenture shall include all rights, powers, and options (but none of the
obligations) of the Borrower with respect thereto, including, without
limitation, the immediate and continuing right to claim for, collect, receive,
and give receipts for Payments in respect of the Receivables and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring judicial proceedings in the name of the Borrower or otherwise, and
generally to do and receive anything that the Borrower is or may be entitled to
do or receive thereunder or with respect thereto.
"Indenture" shall be the trust indenture, dated as of April
15, 1999, by and among the Borrower, the Master Servicer, the Custodian, and the
Trustee.
"Initial Funding Date" shall have the meaning set forth in
Section 1.2 of the Credit Agreement.
"Installment Sale Contract" shall mean the vacation owner
agreement executed by TWRI, Worldmark and an Obligor.
"Intended Tax Characterization" shall have the meaning
specified in Section 4.4(b) of the Indenture.
"Interest Payments" shall be as defined in 2.1(d) of the
Indenture.
"Interest Period" shall mean the calendar month preceding the
related Payment Date.
"Investment" shall mean any loan, advance, extension of credit
(except for accounts and notes receivable for merchandise sold or services
furnished in the ordinary course of business, and amounts paid in advance on
account of the purchase price of merchandise to be delivered to the payor within
one year of the date of the advance), or purchase of stock, notes, bonds or
other securities or capital contribution to any Person, whether in cash or other
property. The amount of any Investment shall be its cost (the amount of cash or
the fair market value of other property given in exchange therefor).
"Issuance Date" shall mean the Initial Funding Date.
"Lender" shall mean Prudential Securities Credit Corporation,
its successors and permitted assigns.
"LIBOR" shall mean, with respect to any date of calculation,
an interest rate per annum equal to the rate for one month maturity appearing on
the Telerate Page 3750 at 11:00 a.m. on such date, as determined by the Lender.
"Lien" shall mean any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, civil law,
statute, civil code or contract, whether or not such interest shall be recorded
or perfected and whether or not such interest shall be contingent upon the
occurrence of some future event or events or the existence of some future
circumstance or circumstances, and including the lien, privilege, security
interest or other encumbrance arising from a mortgage, deed of trust,
hypothecation, cession, transfer, assignment, pledge, adverse claim or charge,
conditional sale or trust receipt, or from a lease, consignment or bailment for
security purposes. The term "Lien" shall also include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting property. For the
purposes of the Credit Agreement, a Person shall be deemed to be the owner of
any property that such Person shall have acquired or shall hold subject to a
conditional sale agreement or other arrangement (including a leasing
arrangement) pursuant to which title to the property shall have been retained by
or vested in some other Person for security purposes.
"Liquidated Receivable" shall mean a Receivable for which a
Liquidation has occurred.
"Liquidation" shall mean, with respect to any Defaulted
Receivable, the sale of the related Vacation Credits, following an enforcement
action to a Person other than the Master Servicer, the Borrower or TWRI.
"Liquidation Proceeds" shall mean the proceeds received in
respect of a Defaulted Receivable after Liquidation.
"Master Servicer" shall mean Trendwest Resorts, Inc.
"Master Servicer Fee" shall mean, for each day, an amount
equal to the product of (a) the Master Servicer Fee Rate, and (b) the Unpaid
Principal Balance of all Trust Estate Receivables as of such date, and (c) a
fraction, the numerator of which is one and the denominator of which is 360.
"Master Servicer Fee Rate" shall mean 1.75%.
"Maturity Date" shall mean April 14, 2000.
"Maximum Leverage Ratio" shall mean the ratio of (1) the
aggregate of all recourse liabilities of TWRI (including with limitation, all
securitization transactions (to the extent of actual recourse available) to (2)
Tangible Net Worth.
"Minimum Assignment Denomination" shall mean $500,000.
"Monthly Charge-off Rate" means, with respect to any Due
Period, a fraction, expressed as a percentage on a per annum basis, the
numerator of which is the product of (x) the Charge-off Factor for such Due
Period, and (y) the Unpaid Principal Balance of all Trust Estate Receivables
that were charged off during such Due Period and the denominator of which is the
average Unpaid Principal Balance of all Trust Estate Receivables for each day in
such Due Period.
"Moody's" shall mean Moody's Investor Services, Inc.
"Net Income" shall mean, on a consolidated basis, as of any
date of determination, for any period, net income (or loss) of TWRI as
determined and computed in accordance with GAAP;
"New Equity" shall mean the sum of (i) the net cash proceeds
of any sale of stock of TWRI by TWRI less (ii) the net cash proceeds received by
TWRI in connection with the sale of stock under TWRI's employee stock option
plans, or TWRI's employee stock purchase plan, approved by TWRI's shareholders.
"Note Daily Interest" shall mean for any day, the product of
the Outstanding Principal Amount for the Notes at the close of business on such
day (including any Advances made on such day), and the applicable Note Interest
Rate for such day.
"Note Interest Payment Amount" shall mean for any Payment
Date, the sum of Note Daily Interest for each day of the related Interest
Period.
"Note Interest Rate" shall mean a per annum rate equal to (i)
if no Event of Default has occurred and is continuing, one month LIBOR plus
1.00%, reset daily, and (ii) if an Event of Default has occurred and is
continuing, one month LIBOR plus 4.00%, reset daily.
"Note Principal Payment Amount" shall mean, for any Payment
Date, an amount sufficient to cause the Outstanding Principal Amount of the
Notes to equal the Borrowing Base (after application of all Payments allocable
to principal in respect of the Trust Estate Receivables for the related Due
Period).
"Note Register" shall be as defined in Section 2.3 of the
Indenture.
"Note Registrar" shall be as defined in Section 2.3 of the
Indenture.
"Noteholder" or "Holder" shall mean a holder of a Note.
"Notes" shall mean the variable funding notes issued under
Article 2 of the Indenture.
"Obligor" means the obligor on an Installment Sale Contract.
"Officer's Certificate" (i) with respect to the Trustee, any
duly authorized officer, including any vice president, assistant vice president,
or any officer or assistant officer of the Trustee customarily performing
functions similar to those performed by any of the above-designated officers and
(ii) with respect to TWRI or the Borrower shall mean a certificate executed on
behalf of such party by the Chairman of the Board, the President or any Vice
President of the relevant entity.
"Outstanding" shall mean, as of any date of determination,
all Notes theretofore authenticated and delivered under this Indenture except:
(a) Notes theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(b) Notes or portions thereof for whose payment money in the
necessary amount has been theretofore irrevocably deposited with the Trustee in
trust for the holders of such Notes; and
(c) 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
Person in whose hands the Note is a valid obligation; provided, however, that in
determining whether the holders of the requisite percentage of the Outstanding
Principal Amount of the Notes have given any request, demand, authorization,
direction, notice, consent, or waiver hereunder, Notes owned by the Borrower or
any Affiliate of the Borrower shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent, or waiver, only Notes that a Responsible Officer of the Trustee
actually knows to be so owned shall be so disregarded.
"Outstanding Principal Amount" shall mean the aggregate unpaid
principal amount of the Notes at any time.
"Paying Agent" shall mean the Trustee.
"Payment Date" shall mean (i) the 15th day of each month
(unless such day is not a Business Day, then the next day that is a Business
Day), commencing on May 17, 1999 and (ii) the Maturity Date.
"Payments" shall mean for any Receivable for any Due Period,
all amounts received with respect to such Receivable during such Due Period,
including, without limitation, payments (including prepayments) from the
relevant Obligor (including principal, interest, late fees and other charges.
"Permitted Liens" shall mean Liens created under the
Indenture.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint stock company,
trust, estate, unincorporated organization or government (or any agency or
political subsection thereof).
"Principal Payments" shall be as defined in Section 2.1(c)
of the Indenture.
"PSI" shall mean Prudential Securities Incorporated.
"Rating Agency" shall mean any of Fitch IBCA, Inc., Duff &
Phelps Credit Rating Co., Standard & Poor's, or Moody's.
"Receipt" shall be defined in Section 4.8 of the Indenture.
"Receivable" shall mean each of the right to use receivables
originated by TWRI with respect to Resorts owned by Worldmark.
"Receivable Acquisition Price" shall mean the lesser of (i)
90% of the Unpaid Principal Balance for Eligible Receivables as of the date of
purchase under the Receivable Sale Agreement, and (ii) 90% of the aggregate
market value of such Eligible Receivables, as determined solely by PSI.
"Receivable Coupon Rate" shall mean, with respect to any
Receivable, the per annum rate of interest set forth in the related Installment
Sale Contract, used to calculate the interest payment due on such Receivable.
"Receivable Documents" shall mean with respect to each Trust
Estate Receivable and each Obligor:
(i) an original Installment Sale Contract with evidence that
the appropriate financing statements have been filed in the appropriate filing
offices;
(ii) a notice of sale and assignment affixed to the
Installment Sale Contract stating the following: "Undivided interests in the
Receivables described herein have been sold to TW Holdings II, Inc. pursuant to
a Receivable Sale Agreement dated as of April 15, 1999, between Trendwest
Resorts, Inc. and TW Holdings II, Inc. TW Holdings II, Inc. has pledged such
interest to LaSalle National Bank, as Trustee, pursuant to an Indenture dated as
of April 15, 1999, by and among TW Holdings II, Inc., Trendwest Resorts, Inc.
and LaSalle National Bank."
(iii) an original of each guarantee, assumption,
modification or substitution agreement, if any, which relates to the related
Receivable (or copy thereof certified by an officer of the Borrower to be a true
and correct copy); and
(iv) copies of all other Receivable Files related to such
Receivable.
"Receivable Files" shall mean the documents and other papers
and computerized records customarily maintained by the Master Servicer in
servicing receivables comparable to the Receivables.
"Receivable Sale Agreement" shall mean the Receivable Sale
Agreement dated as of April 15, 1999 between the Borrower and TWRI, pursuant to
which the Borrower agrees to acquire Eligible Receivables from TWRI, as from
time to time further amended, supplemented or modified.
"Record Date" shall mean, with respect to a Payment Date, the
last day of the calendar month immediately preceding such Payment Date.
"Records" shall refer to all documents, books, records and
other information (including, without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
prepared and maintained by the Master Servicer or by or on behalf of the
Borrower with respect to Receivables and the related Obligors.
"Repurchase Requirement" shall be as defined in Section 5(d)
of the Receivables Sale Agreement.
"Request for Release" shall be as defined in the Section 4.6
of the Indenture.
"Required Information" shall mean, as of the related Cut-Off
Date, with respect to a Trust Estate Receivable, the following information: (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 Receivable Coupon Rate, (f) its
date of origination, (g) the Original Principal Balance, (h) the Unpaid
Principal Balance as of the Cut-Off Date, (i) the maturity date, (j) the monthly
payment amount, (k) sale price, (l) the paid-through date, (m) the first payment
date, (n) the date of sale, and (o) the related number of Vacation Credits.
"Requirement of Law" shall mean, as to any Person, any law,
treaty, rule or regulation, or determination of an arbitrator or Governmental
Authority, in each case applicable to or binding upon such Person or to which
such Person is subject, whether federal, state or local (including, without
limitation, usury laws, the federal Truth in Lending Act and Regulation Z and
Regulation B of the Board of Governors of the Federal Reserve System).
"Responsible Officer" shall mean, with respect to the
Trustee, any officer or such officer's superiors assigned to the Asset Backed
Securities Trust Group of the Trustee and the transactions contemplated by the
Warehouse Facility Documents, including any Managing Director, Vice President,
Assistant Vice President, Secretary, Assistant Secretary, Treasurer, Assistant
Treasurer, any trust officer or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers.
"Resorts" shall mean all the resorts owned (or leased) and
operated by Worldmark, whether existing on the Issuance Date or in the future.
"Sale Assignment" each assignment executed by TWRI in favor
of the Borrower from time to time pursuant to the Receivable Sale Agreement
conveying Receivables to the Borrower.
"Sale Date" shall mean, with respect to any Receivable, the
date on which such Receivable is sold or contributed pursuant to Section 2 of
the Receivable Sale Agreement.
"Schedule of Exceptions" shall be as defined in Section 4.6
of the Indenture.
"Schedule of Receivables" shall mean a list containing the
Required Information with respect to each Trust Estate Receivable delivered to
the Trustee and the Custodian under the Indenture.
"Securities" shall mean, with respect to any Person, any
shares of any class of such Person's capital stock, or any options or warrants
to purchase its capital stock or other security exchangeable for or convertible
into its capital stock.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Securitization Take-out" shall mean a transaction pursuant
to which the Trust Estate Receivables and other related Assets constituting the
Trust Estate are reconveyed in connection with the public issuance or private
placement of securities rated by at least one of the Rating Agencies and backed
by the Trust Estate Receivables and other related Assets.
"Security Interest" shall mean the security interest and
rights created under the Indenture in the Assets in favor of the Trustee.
"Servicer Report" shall be as defined in Section 5.2 of the
Indenture.
"Solvent" shall mean, with respect to any Person, that:
(a) the properties of such Person, at a fair valuation,
exceed the total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of such Person;
(b) based on current projections, which are based on
underlying assumptions which provide a reasonable basis for the projections and
which reflect such Person's judgment based on present circumstances of the most
likely set of conditions and such Person's most likely course of action for the
period projected, such Person believes it has sufficient cash flow to enable it
to pay its debts as they mature; and
(c) such Person does not have an unreasonably small capital
with which to engage in its anticipated business.
"Standard & Poor's" shall mean Standard & Poor's Ratings
Group, a division of The McGraw Hill Companies, Inc.
"Subsequent Funding Date" shall have the meaning set forth
in Section 1.2 of the Credit Agreement.
"Substitute Receivable" means an Eligible Receivable
submitted for a Trust Estate Receivable under Section 4.6 of the Indenture: (i)
having as of the time of substitution a principal balance, after deduction of
the principal portion of the monthly payment due in the month of substitution
equal to or greater than the Unpaid Principal Balance of the Trust Estate
Receivable for which it is being substituted, provided that if more than one
Receivable is being submitted, the aggregate principal balance of all submitted
Receivables shall be equal or greater than the Unpaid Principal Balance of the
Trust Estate Receivables for which they are being substituted, (ii) having a
Receivable Coupon Rate equal to or greater than the Receivable Coupon Rate of
the Trust Estate Receivable for which it is being substituted, and (iii)
otherwise satisfying the representations and warranties contained therein.
"Tangible Net Worth" shall equal a Person's (i) net worth as
calculated under GAAP, less (ii) receivables from stockholders or Affiliates,
less (iii) intangible assets as calculated under GAAP.
"Tax or Taxes" shall mean all taxes, charges, fees, levies
or other assessments, including, without limitation, income, gross receipts,
profits, withholding, excise, property, sales, use, occupation and franchise
taxes (including, in each such case, any interest, penalties or additions
attributable to or imposed on or with respect to any such taxes, charges, fees
or other assessments) imposed by the United States, any state or political
subdivision thereof, any foreign government or any other jurisdiction or taxing
authority.
"Transfer" shall be as specified in Section 4.2(a) of the
Indenture.
"Transfer Notice" shall be as specified in Section 4.2(b) of
the Indenture.
"Trust Accounts" shall mean such accounts as the Trustee may
create from time to time under the Indenture.
"Trust Estate" shall mean all money, instruments and other
property and rights subject to the lien of this Indenture, including all
proceeds thereof.
"Trust Estate Receivables" shall mean all Receivables that
are pledged to the Trustee and are part of the Trust Estate.
"Trustee" shall be LaSalle National Bank.
"Trustee Fee" shall mean an amount equal to $2,500 a month.
"TWRI" shall mean Trendwest Resorts, Inc., an Oregon
corporation.
"TWRI Receivables" shall mean, as of any time, all right to
use timeshare receivables originated by TWRI other than Receivables that have
been paid in full or charged off and including the Trust Estate Receivables.
"UCC" shall mean the Uniform Commercial Code as in effect in
the relevant state.
"Unpaid Principal Balance" means the unpaid principal amount
for a Receivable as of the end of the most recent Due Period, or in the case of
the initial funding, on a date agreed upon by the Lender and the Borrower on the
Initial Funding Date.
"Upgrade" shall mean the prepayment of a Receivable and
entry into a new Installment Sale Contract by an Obligor, Worldmark and TWRI,
pursuant to which the Obligor purchases additional Vacation Credits in exchange
for an increase in the principal balance owed by such Obligor.
"Vacation Credit Purchase Price" shall mean, with respect to
a Defaulted Receivable, the lesser of (a) an amount equal to 25% of the price at
which the related Obligor purchased the related Vacation Credits, and (b) the
Unpaid Principal Balance of such Defaulted Receivable.
"Vacation Credits" shall mean the related Obligor's Vacation
Credits in Worldmark.
"Warehouse Facility Documents" shall mean the Credit
Agreement, the Receivable Sale Agreement, the Indenture, the Collateral
Assignments, any Subservicing Agreement, the Engagement Letter and the Notes.
"Worldmark" shall mean Worldmark, the Club, a California
mutual benefit corporation which holds unencumbered fee title to (or a long term
lease on) the Resorts subject to the rights of the Obligors to use the Resorts.
"Year 2000 Problem" shall mean the inability of computers,
as well as embedded microchips in non-computing devices, to perform properly
date-sensitive functions with respect to certain dates prior to and after
December 31, 1999.
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,162
<SECURITIES> 0
<RECEIVABLES> 110,099
<ALLOWANCES> 15,771
<INVENTORY> 44,057
<CURRENT-ASSETS> 0
<PP&E> 22,652
<DEPRECIATION> 2,341
<TOTAL-ASSETS> 207,100
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 61,318
<OTHER-SE> 97,068
<TOTAL-LIABILITY-AND-EQUITY> 207,100
<SALES> 112,442
<TOTAL-REVENUES> 133,199
<CGS> 34,103
<TOTAL-COSTS> 34,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,820
<INTEREST-EXPENSE> 109
<INCOME-PRETAX> 28,942
<INCOME-TAX> 11,288
<INCOME-CONTINUING> 17,654
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,654
<EPS-BASIC> 1.03
<EPS-DILUTED> 1.03
</TABLE>
