United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
[ ] 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 (I.R.S. Employer Identification No.)
of 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 May 4, 2000: 16,939,894 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item I - Financial Statements
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
----------------- ----------------
<S> <C> <C>
Assets:
Cash $ 1,655 1,760
Restricted cash 7,107 2,987
Notes Receivable, net of allowance for doubtful accounts, sales
returns and deferred gross profit 79,122 84,802
Accrued interest and other receivables 9,514 8,506
Residual interest in Notes Receivable sold 37,701 36,265
Receivable from Parent 4,337 3,058
Inventories 51,191 45,601
Property and equipment, net 25,750 24,327
Deferred income taxes 497 --
Other assets 3,738 2,657
----------------- ----------------
Total assets $ 220,612 209,963
================= ================
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable 1,811 1,900
Accrued liabilities 12,622 12,405
Accrued construction in progress 1,189 790
Borrowing under bank line of credit -- 3,900
Allowance for recourse liability and deferred gross profit on Notes
Receivable sold 17,703 17,211
Income taxes payable 6,319 42
----------------- ----------------
Total liabilities 39,644 36,248
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 16,939,834 and 17,041,078 shares at
March 31, 2000 and December 31, 1999, respectively. 56,997 59,428
Accumulated other comprehensive income 14 --
Retained earnings 123,957 114,287
----------------- ----------------
Total shareholders' equity 180,968 173,715
Commitments and contingencies
----------------- ----------------
Total liabilities and shareholders' equity $ 220,612 209,963
================= ================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
----------------- ----------------
<S> <C> <C>
Revenues:
Vacation Credit sales, net $ 62,863 49,016
Finance income 4,228 3,951
Gains on sales of Notes Receivable 3,589 4,350
Resort management services 1,613 823
Other 1,251 1,765
----------------- ----------------
Total revenues 73,544 59,905
----------------- ----------------
Costs and operating expenses:
Vacation Credit cost of sales 14,591 13,621
Resort management services 422 397
Sales and marketing 30,580 23,498
General and administrative 7,250 5,394
Provision for doubtful accounts and recourse
liability 4,604 3,443
Interest 47 55
----------------- ----------------
Total costs and operating expenses 57,494 46,408
----------------- ----------------
Income before income taxes 16,050 13,497
Income tax expense 6,380 5,353
----------------- ----------------
Net income $ 9,670 8,144
================= ================
Basic net income per common share $ .57 .47
Diluted net income per common share $ .57 .47
Weighted average shares of common stock and dilutive potential common stock
outstanding:
Basic 16,969,603 17,158,766
Diluted 17,035,757 17,179,327
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,670 8,144
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 594 406
Gain on sale of property and equipment -- (896)
Amortization of residual interest in Notes Receivable sold 3,125 2,247
Provision for doubtful accounts, sales returns and recourse liability 5,620 4,722
Recoveries of Notes Receivable charged off 52 53
Residual interest in Notes Receivables sold (3,674) (4,350)
Amortization of servicer liability (186) --
Change in deferred gross profit (30) (171)
Deferred income tax (benefit) expense (539) 568
Issuance of Notes Receivable (54,338) (42,060)
Proceeds from sale of Notes Receivable 42,332 32,244
Proceeds from repayment of Notes Receivable 16,596 8,096
Purchase of Notes Receivable (4,950) (595)
Changes in certain assets and liabilities:
Restricted cash (4,120) (903)
Inventories (6,405) 3,900
Accounts payable and accrued liabilities 713 237
Income taxes payable 6,319 4,060
Other (2,154) 140
----------------- ----------------
Net cash provided by operating activities 8,625 15,842
----------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (1,178) (1,577)
Proceeds from sale of property and equipment -- 4,412
----------------- ----------------
Net cash provided by (used in) investing activities (1,178) 2,835
----------------- ----------------
Cash flows from financing activities:
Net change in bank line of credit (3,900) (11,000)
Increase in receivable from Parent (1,279) (320)
Decrease in due to Parent -- (5,688)
Issuance of common stock 166 --
Repurchase of common stock (2,597) --
----------------- ----------------
Net cash used in financing activities (7,610) (17,008)
----------------- ----------------
Net (decrease) increase in cash (163) 1,669
Effect of foreign currency exchange rates on cash 58 --
Cash at beginning of period 1,760 9
----------------- ----------------
Cash at end of period $ 1,655 1,678
================= ================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(continued)
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------
2000 1999
----------------- ----------------
<S> <C> <C>
Supplemental disclosures of cash flow information -
cash paid during the period for:
Interest (excluding capitalized amounts of $102 and $388,
respectively) $ 47 480
Income taxes -- 725
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
TRENDWEST RESORTS, INC.
AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
(dollars in thousands)
(Unaudited)
Note 1 - Background
Trendwest Resorts, Inc. and subsidiaries (Company) markets, sells and finances
timeshare ownership interests in the form of perpetual timeshare credits
(Vacation Credits) in WorldMark, the Club (WorldMark). Vacation Credits are
created through the transfer to WorldMark of resort units acquired or developed
by the Company. The Company derives revenues primarily from Vacation Credit
sales and, to a lesser extent, from the financing of Vacation Credit sales and
from its management agreement with WorldMark.
These condensed consolidated financial statements do not include certain
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
are of a normal recurring nature. Operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2000.
These statements should be read in conjunction with the audited financial
statements and footnotes included in the Company's 1999 Form 10-K filed with the
Securities and Exchange Commission (SEC). The accounting policies used in
preparing these condensed consolidated financial statements are the same as
those described in such Form 10-K.
Note 2 - New Accounting Pronouncements
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.
In December, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition", to be effective as of
the second quarter of 2000. Compliance with SAB No. 101 is not expected to
result in any material change to the Company's revenue recognition policies.
Note 3 - Foreign Currency Translation
Assets and liabilities in foreign functional currencies are translated into U.S.
dollars based upon the prevailing currency exchange rates in effect at the
balance sheet date. Translation gains and losses are not included in the
determination of net income but are accumulated in a separate component of
shareholders' equity. These translation gains and losses are the only component
of accumulated other comprehensive income on the accompanying consolidated
balance sheets. Transaction gains or losses are recorded in the results of
operations and were insignificant for the three month period ended March 31,
2000.
7
<PAGE>
Note 4 - Basic and Diluted Net Income Per Common Share
The following presents the reconciliation of weighted average shares used for
basic and diluted net income per share:
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------------
2000 1999
----------------- ------------------
<S> <C> <C>
Basic
Basic weighted average shares 16,969,603 17,158,766
Diluted
Effect of dilutive securities 66,154 20,561
----------------- ------------------
Diluted weighted average shares outstanding 17,035,757 17,179,327
================= ==================
</TABLE>
Net income available to common shareholders for basic net income per share was
$9,670 and $8,144 for the three months ended March 31, 2000 and 1999,
respectively.
At March 31, 2000 and 1999, there were options to purchase 446,000 and 492,500
shares of common stock outstanding, respectively, which were antidilutive and
therefore not included in the computation of diluted net income per share.
Note 5 - Inventories
Inventories consist of Vacation Credits and construction in progress as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- ----------------
<S> <C> <C>
Vacation Credits $ 7,639 13,247
Construction in progress 43,552 32,354
----------------- ----------------
Total inventories $ 51,191 45,601
================= ================
</TABLE>
8
<PAGE>
Note 6 - Notes Receivable, Allowance For Doubtful Accounts, Recourse Liability
and Sales Returns
The following table summarizes the Company's total Notes Receivable portfolio
at:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- ------------------
<S> <C> <C>
Total Notes Receivable $ 412,268 $ 389,901
Less Notes Receivable sold (315,287) (288,950)
----------------- ------------------
Gross on balance sheet Notes Receivable 96,981 100,951
================= ==================
Unencumbered Notes Receivable 59,984 64,169
Retained interest in Notes Receivable sold 36,997 36,782
----------------- ------------------
Gross on balance sheet Notes Receivable 96,981 100,951
Less: Deferred gross profit (963) (970)
Allowance for doubtful accounts and sales returns (16,896) (15,179)
----------------- ------------------
Notes Receivable, net $ 79,122 $ 84,802
================= ==================
</TABLE>
The activity in the allowance for doubtful accounts, recourse liability and
sales returns is as follows for the three months ended March 31, 2000 and the
year ended December 31, 1999:
<TABLE>
<CAPTION>
2000 1999
----------------- ------------------
<S> <C> <C>
Balances at beginning of period $ 29,087 20,935
Provision for doubtful accounts, sales returns and
recourse liability 5,620 21,407
Notes receivable charged-off and sales returns net of
Vacation Credits recovered (3,440) (13,515)
Recoveries 52 260
----------------- ------------------
Balances at end of period $ 31,319 29,087
================= ==================
Allowance for doubtful accounts and sales returns $ 16,896 15,179
Recourse Liability on notes receivable sold 14,423 13,908
----------------- ------------------
$ 31,319 29,087
================= ==================
</TABLE>
Total notes receivable outstanding, including notes receivable sold, amounted to
$412,268 and $389,901 at March 31, 2000 and December 31, 1999, respectively.
9
<PAGE>
Note 7 - Commitments and Contingencies
(a) Purchase Commitments
The Company routinely enters into purchase agreements with various parties to
acquire and build resort properties. At March 31, 2000 the Company had
outstanding purchase commitments of $96.5 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. The finance segment is primarily
responsible for servicing and collecting Notes Receivable originated in
conjunction with the financing of sales of Vacation Credits. The finance segment
does not include TW Holdings, TW Holdings II, TW Holdings III, Trendwest Funding
I, Trendwest Funding II, TRI Funding III or Trendwest Resorts South Pacific.
Management evaluates the business based on U.S. 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.
The following tables summarize the segment activity of the Company:
<TABLE>
<CAPTION>
Segment
Three months ended March 31, 2000: Sales Finance Other Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
External revenue $ 62,811 1,036 1,613 65,460
Interest revenue - net -- 1,311 -- 1,311
Interest revenue-intersegment -- 1,531 -- 1,531
Intersegment revenue -- 296 -- 296
----------- ----------- ----------- -------------
Segment revenue $ 62,811 4,174 1,613 68,598
Segment profit $ 11,889 2,868 1,191 15,948
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability 5,614 -- -- 5,614
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Segment
Three months ended March 31, 1999: Sales Finance Other Total
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
External revenue $ 49,016 1,722 823 51,561
Interest revenue - net -- 1,199 -- 1,199
Interest revenue-intersegment -- 726 -- 726
Intersegment revenue -- 429 -- 429
----------- ----------- ----------- -------------
Segment revenue $ 49,016 4,076 823 53,915
Segment profit $ 7,483 3,101 426 11,010
Significant non-cash items:
Provision for doubtful accounts, sales
returns and recourse liability 4,722 -- -- 4,722
Gain on sale of property and equipment -- 896 -- 896
</TABLE>
The following table provides a reconciliation of segment revenues and profits to
the consolidated amounts:
<TABLE>
<CAPTION>
Three months ended March 31,
2000 1999
---------------- ---------------
<S> <C> <C>
Segment revenue $ 68,598 53,915
Interest expense reported net of interest
income 47 55
Elimination of intersegment revenue (1,827) (1,155)
Other subsidiaries revenue 6,726 7,090
---------------- ---------------
Consolidated revenue $ 73,544 59,905
================ ===============
Segment profit $ 15,948 11,010
Corporate overhead not included in segment
reporting (4,212) (3,431)
Other subsidiaries profit 4,314 5,918
---------------- ---------------
Consolidated pre-tax income $ 16,050 13,497
================ ===============
</TABLE>
The Company's revenue from external customers is mainly derived from sales
within the United States. The Company has no long-lived assets other than
financial instruments.
11
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The statements below and other statements herein contain forward looking
information which include future financing transactions, acquisition of
properties, and the Company's future prospects and other forecasts and
statements of expectations. Actual results may differ materially from those
expressed in any forward-looking statement made by the Company, due among other
things, to the Company's ability to develop or acquire additional resort
properties, find acceptable debt or equity capital to fund such development, as
well as other risk factors as outlined in the "Risk Factors" section of the
Company's Form 10-K.
The Company achieved total revenues of $73.5 million for the three months ended
March 31, 2000, compared to $59.9 million for the three months ended March 31,
1999, an increase of 22.7%. The principal reason for the overall improvement was
a 28.4% increase in Vacation Credit sales to $62.9 million for the three months
ended March 31, 2000 from $49.0 million for the three months ended March 31,
1999. The increase in Vacation Credit sales was primarily the result of a 23.8%
increase in the number of Vacation Credits sold to 45.8 million for the three
months ended March 31, 2000, from 37.0 million for the three months ended March
31, 1999. The increase in Vacation Credits sold was largely attributable to
continued improvement in existing sales offices, opening four new offices in the
second half of 1999 and increased Upgrade Sales. Revenues from Upgrade Sales
increased 40.8% to $10.0 million for the three months ended March 31, 2000, from
$7.1 million for the three months ended March 31, 1999. The increase in Upgrade
sales is the result of continuing satisfaction on the part of WorldMark Owners
and the ongoing growth in the owner base. The average price per Vacation Credit
sold increased to $1.37 per credit for the three months ended March 31, 2000
versus $1.32 per credit for the three months ended March 31, 1999 primarily as a
result of an approximate 4% increase in the selling price of Vacation Credits
effective June, 1999.
Finance income for the three months ended March 31, 2000 increased 5% to $4.2
million from $4.0 million for the three months ended March 31, 1999 due to
increased average carrying balances of Notes Receivable for the two periods
compared. Gains on sales of Notes Receivable decreased 18.2% in 2000 over the
comparable period last year because of higher interest rates which reduced the
net interest spread.
Vacation Credit cost of sales, as a percentage of Vacation Credit sales, was
23.2% for the three months ended March 31, 2000 versus 27.8% for the three
months ended March 31, 1999. This decrease resulted from the addition of 28
units at Fiji and 17 units at Rancho Vistoso in Arizona, both of which had
product costs much lower than the Company's historical average. Over the
remainder of 2000, the Company expects product cost, as a percentage of Vacation
Credit sales, to trend toward the historical average.
Sales and marketing costs, as a percentage of Vacation Credit sales, were 48.6%
for the three months ended March 31, 2000 as compared to 48.0% for the three
months ended March 31, 1999. This was the result of increased marketing costs
per tour which was partially offset by higher sales closing percentages.
General and administrative expenses increased 35.2% to $7.3 million for the
three months ended March 31, 2000 from $5.4 million for the three months ended
March 31, 1999. The increase resulted from fully expensing start-up costs for
the new Midwest, Las Vegas and South Pacific regions without the corresponding
benefit of sales.
Provision for doubtful accounts and recourse liability, as a percentage of
Vacation Credit sales, was 7.3% of Vacation Credit sales for the first quarter
of 2000 versus 6.9% for the comparable period last year. This increase was the
result of a higher mix of sales in newer regions with expected default rates
higher than the Company's historical experience.
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 March 31, 2000 and December 31, 1999
were $31.3 million, and $29.1 million, respectively, representing approximately
12
<PAGE>
7.6% and 7.5%, 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 in
estimating the allowance for doubtful accounts and recourse liability. The
Company also utilizes experience factors of more mature sales sites in
establishing the allowance for bad debts at new sales offices. The Company
generally charges off all receivables when they become 180 days past due and
returns the credits associated with such charge-offs to inventory. At March 31,
2000 and December 31, 1999, 1.81% and 1.91% of the Company's total receivables
portfolio of $412.3 million and $389.9 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 which are financed, cash sales of Vacation Credits, principal
and interest payments on Notes Receivable, and proceeds from sales and
borrowings collateralized by Notes Receivable. The Company also generates cash
on the interest differential between the interest charged on the Notes
Receivable and the interest paid on loans collateralized by Notes Receivable.
During the three months ended March 31, 2000 and 1999, cash provided by
operating activities was $8.6 million and $15.8 million, respectively. For the
three months ended March 31, 2000, cash provided by operating activities
resulted primarily from sales and repayments of Notes Receivable of $58.9
million, an increase in taxes payable of $6.3 million and net income of $9.7
million. For the three months ended March 31, 2000, cash used in operating
activities was principally for the issuance and purchase of Notes Receivable of
$59.3 million to finance the purchase of Vacation Credits by Owners, and an
increase in inventory of $6.4 million. For the three months ended March 31, 1999
cash provided by operating activities resulted primarily from the sale and
repayment of Notes Receivable of $40.3 million, a decrease in inventory of $3.9
million, an increase in taxes payable of $4.1 million and net income of $8.1
million. Cash used in operating activities was primarily for the issuance and
purchase of Notes Receivable of $42.7 million to finance the purchase of
Vacation Credits by Owners.
Net cash (used in) provided by investing activities for the three months ended
March 31, 2000 and 1999 was ($1.2) and $2.8 million, respectively. Cash used in
investing activities for the three months ended March 31, 2000, of $1.2 million
was the result of furniture and equipment purchases to support the Company's
ongoing growth. Cash provided for the same period in 1999 of $4.4 million in
proceeds from the sale of the Bellevue corporate building. Cash used in
investing activities of $1.6 million was the result of final retention payments
on the new Corporate headquarters and other furniture and equipment related to
the new building
Net cash used in financing activities for the three months ended March 31, 2000
and 1999, was $7.6 million and $17.0 million, respectively. For the three months
ended March 31, 2000, cash used in financing activities was principally the
result of a decrease in net borrowings under the bank line of credit of $3.9
million, repurchase of common stock of $2.6 million, and increase in receivable
from Parent of $1.3 million. For the three months ended March 31, 1999, cash
used in financing activities was principally the result of a decrease in net
borrowings under the bank line of credit of $11.0 million and payments to the
Parent on the revolving line of credit of $5.7 million.
The Company has a $30.0 million unsecured revolving credit agreement (Credit
Agreement) with a group of banks. The credit agreement provides for borrowings
at the reference rate as announced by Bank of America, NT&SA or at LIBOR plus
100 basis points and a commitment fee to the banks of 30 basis points per annum
on the total unused amount of the commitment. Availability under the line of
credit is subject to a borrowing base which is a percentage of unencumbered
Notes Receivable and inventory, including property under development. Under the
terms of the Credit Agreement, the Company is required to maintain certain
interest coverage ratios and capitalization ratios and also imposes limitations
on certain liens and carrying amounts of inventory. The Credit Agreement matures
on February 12, 2001. Borrowings outstanding at March 31, 2000 and December 31,
13
<PAGE>
1999 were $0 and $3,900 respectively, at weighted average interest rates of 0%
and 8.50%, respectively.
The Company has a $10 million open line of credit with the Parent which bears
interest at prime plus 1% (currently 10.0%) per annum. The line of credit is
payable on demand. As of March 31, 2000, there was no outstanding indebtedness
to the Parent. The Company may advance excess funds to the Parent at the prime
rate minus 2% (currently 7.0%) per annum. At March 31, 2000, there was a $4.3
million Receivable from Parent.
For the remainder of 2000, the Company anticipates spending approximately $102.0
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, borrowings on the bank line of
credit and further sales and securitizations of Notes. 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, will be sufficient to meet
the Company's working capital and capital expenditure needs through the end of
2000.
WorldMark maintains a replacement reserve for the WorldMark Resorts which is
funded from the annual assessments of the Owners. At March 31, 2000, the amount
of such reserve was approximately $13.3 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 the sale
of Notes Receivable through the Finance Subsidiaries, borrowings under the $30.0
million revolving line of credit and loans from the Parent. See "Risk Factors
Dependence on Acquisitions of Additional Resort Units for Growth; Need for
Additional Capital" of the Company's 1999 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.
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 is also
subject to foreign currency exchange rate risk when developing resort properties
denominated in a foreign currency. As the Company expands its operations
worldwide, there will be additional exposure to foreign currency exchange risk.
The Company does not maintain a trading account for any class of financial
instrument, it does not purchase high risk derivative instruments and it is not
directly subject to commodity price risk. There have been no material changes to
the Company's exposure to market risk since December 31, 1999.
14
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Incorporated by reference. See Note 7 of "Notes to Condensed
Consolidated Financial Statements."
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission of Matter to a Vote of Security Holders
None
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Restated Articles of Incorporation (1)
2.2 Restated Bylaws (1)
10.1 Receivables Purchase Agreement dated as of January 7, 2000 Among
Registrant, TW Holdings III, Inc., Sage Systems, Inc. International
Securitization Corporation and Bank One, NA
10.2 Receivables Sale Agreement dated as of January 7, 2000 Among Registrant
and TW Holdings III, Inc.
11 Statement re: Computation of Earnings per share - See note 4 of "Notes
to Condensed Consolidated Financial Statements."
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
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TRENDWEST RESORTS, INC.
Date: May 12, 2000 /s/ WILLIAM F. PEARE
--------------------- -------------------------------------------
William F. Peare
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: May 12, 2000 /s/ TIMOTHY P. O'NEIL
--------------------- -------------------------------------------
Timothy P. O'Neil
Vice President, Chief Financial Officer
(Principal Financial Officer)
RECEIVABLES PURCHASE AGREEMENT
dated as of January 7, 2000
Among
TW HOLDINGS III, INC., as Seller,
TRENDWEST RESORTS INC., as Servicer,
SAGE SYSTEMS, INC., as Custodian,
INTERNATIONAL SECURITIZATION CORPORATION,
BANK ONE, NA (MAIN OFFICE CHICAGO), as Agent
and
BANK ONE, NA, as Paying Agent
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TABLE OF CONTENTS
ARTICLE I PURCHASE ARRANGEMENTS................................................1
Section 1.1 Purchase Facility.......................................1
Section 1.2 Increases...............................................1
Section 1.3 Decreases...............................................2
Section 1.4 Payment Requirements....................................2
Section 1.5 Repurchase or Substitution for Charged-Off and
Defaulted Receivables...................................3
Section 1.6 Upgrades................................................4
ARTICLE II PAYMENTS AND COLLECTIONS............................................5
Section 2.1 Payments................................................5
Section 2.2 Distributions Prior to Amortization Date................5
Section 2.3 Distributions Following Amortization Date...............7
Section 2.4 Sharing of Applications.................................7
Section 2.5 Payment Recission.......................................7
Section 2.6 Maintenance of Purchaser Interest.......................8
Section 2.7 Clean Up Call...........................................8
Section 2.8 Designated Accounts.....................................8
Section 2.9 Investment of Amounts in Designated Accounts............9
Section 2.10 Procedures for Substitution and Release of Receivables..9
Section 2.11 Deemed Collections.....................................10
ARTICLE III CONDUIT FUNDING...................................................10
Section 3.1 CP Costs...............................................10
Section 3.2 CP Costs Payments......................................10
Section 3.3 Calculation of CP Costs and Carrying and Servicing
Costs..................................................10
ARTICLE IV FINANCIAL INSTITUTION FUNDING......................................10
Section 4.1 Financial Institution Funding..........................10
Section 4.2 Yield Payments.........................................11
Section 4.3 Selection and Continuation of Tranche Periods..........11
Section 4.4 Financial Institution Discount Rates...................11
Section 4.5 Suspension of the LIBO Rate............................11
ARTICLE V REPRESENTATIONS AND WARRANTIES......................................12
Section 5.1 Representations and Warranties of Originating Parties..12
Section 5.2 Financial Institution Representations and Warranties...16
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ARTICLE VI CONDITIONS OF PURCHASES............................................17
Section 6.1 Conditions Precedent to Initial Purchase...............17
Section 6.2 Conditions Precedent to All Purchases..................17
ARTICLE VII COVENANTS.........................................................18
Section 7.1 Affirmative Covenants of the Originating Parties.......18
Section 7.2 Negative Covenants of the Originating Parties..........25
ARTICLE VIII ADMINISTRATION AND COLLECTION....................................25
Section 8.1 Designation of Servicer................................25
Section 8.2 Duties of Servicer.....................................26
Section 8.3 Collections Following an Amortization Event............27
Section 8.4 Responsibilities of Seller.............................27
Section 8.5 Reports................................................27
Section 8.6 Servicing Fees.........................................28
Section 8.7 TWRI Financial Covenants...............................28
ARTICLE IX HEDGING............................................................28
Section 9.1 Hedge Event............................................28
Section 9.2 Hedge Accumulation Period..............................28
ARTICLE X AMORTIZATION EVENTS.................................................29
Section 10.1 Amortization Events....................................29
Section 10.2 Remedies...............................................31
ARTICLE XI INDEMNIFICATION....................................................32
Section 11.1 Indemnities by the Originating Parties.................32
Section 11.2 Increased Cost and Reduced Return......................34
Section 11.3 Other Costs and Expenses...............................35
Section 11.4 Allocations............................................35
ARTICLE XII THE AGENT.........................................................35
Section 12.1 Authorization and Action...............................35
Section 12.2 Delegation of Duties...................................36
Section 12.3 Exculpatory Provisions.................................36
Section 12.4 Reliance by Agent......................................36
Section 12.5 Non-Reliance on Agent and Other Purchasers.............37
Section 12.6 Reimbursement and Indemnification......................37
Section 12.7 Agent in its Individual Capacity.......................37
Section 12.8 Successor Agent........................................37
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ARTICLE XIII ASSIGNMENTS; PARTICIPATIONS......................................38
Section 13.1 Assignments............................................38
Section 13.2 Participations.........................................39
ARTICLE XIV LIQUIDITY FACILITY................................................39
Section 14.1 Transfer to Financial Institutions.....................39
Section 14.2 Transfer Price Reduction Yield.........................40
Section 14.3 Payments to Conduit....................................40
Section 14.4 Limitation on Commitment to Purchase from Conduit......40
Section 14.5 Defaulting Financial Institutions......................40
ARTICLE XV THE CUSTODIAN......................................................41
Section 15.1 Appointment of Custodian; Delivery of Records;
Verification...........................................41
Section 15.2 Receipts...............................................42
Section 15.3 Duties of Custodian....................................42
Section 15.4 Representations and Warranties of Custodian............43
Section 15.5 Indemnification of Custodian...........................44
Section 15.6 Adverse Interests......................................44
Section 15.7 Termination of Custodian...............................44
ARTICLE XVI MISCELLANEOUS.....................................................45
Section 16.1 Waivers and Amendments.................................45
Section 16.2 Notices................................................45
Section 16.3 Ratable Payments.......................................46
Section 16.4 Protection of Ownership Interests of the Purchasers....46
Section 16.5 Confidentiality........................................47
Section 16.6 Bankruptcy Petition....................................47
Section 16.7 Limitation of Liability................................48
Section 16.8 CHOICE OF LAW..........................................48
Section 16.9 CONSENT TO JURISDICTION................................48
Section 16.10 WAIVER OF JURY TRIAL...................................48
Section 16.11 Integration; Binding Effect; Survival of Terms.........48
Section 16.12 Counterparts; Severability; Section References.........49
Section 16.13 Bank One Roles.........................................49
Section 16.14 Characterization.......................................49
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Exhibits and Schedules
Exhibit I Definitions
Exhibit II Form of Purchase Notice
Exhibit III Places of Business of the Originating Parties; Locations of
Records; Federal Employer Identification Number(s)
Exhibit IV Form of Seller Direction
Exhibit V Form of Compliance Certificate
Exhibit VI Form of Assignment Agreement
Exhibit VII Credit and Collection Policy
Exhibit VIII Form of Vacation Owner Agreements
Exhibit IX Form of Monthly Report
Exhibit X Request for Release
Exhibit XI Receipt
Exhibit XII Account Numbers
Schedule A Commitments of Financial Institutions
Schedule B Documents to be Delivered to the Agent on or Prior to the
Initial Purchase
Schedule C Existing Environmental Claims
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RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of January 7, 2000 is among TW
Holdings III, Inc., a Delaware corporation ("Seller"), Trendwest Resorts, Inc.,
an Oregon corporation ("TWRI"), as initial Servicer (the Servicer together with
the Seller, the "Originating Parties" and each an "Originating Party"), Sage
Systems, Inc., as Custodian, the funding entities listed on Schedule A to this
Agreement (together with their respective successors and assigns hereunder, the
"Financial Institutions"), International Securitization Corporation ("Conduit"),
Bank One, NA, as paying agent to the extent described herein (the "Paying
Agent") and Bank One, NA (Main Office Chicago) as agent for the Purchasers
hereunder or any successor agent hereunder (together with its successors and
assigns hereunder, the "Agent"). Unless defined elsewhere herein, capitalized
terms used in this Agreement shall have the meanings assigned to such terms in
Exhibit I.
PRELIMINARY STATEMENTS
Seller desires to transfer and assign Purchaser Interests to the Purchasers
from time to time.
Conduit may, in its absolute and sole discretion, purchase Purchaser
Interests from Seller from time to time.
In the event that Conduit declines to make any purchase, the Financial
Institutions shall, at the request of Seller, purchase Purchaser Interests from
time to time. In addition, the Financial Institutions have agreed to provide a
liquidity facility to Conduit in accordance with the terms hereof.
Bank One, NA has been requested and is willing to act as Agent on behalf of
Conduit and the Financial Institutions in accordance with the terms hereof.
ARTICLE I
PURCHASE ARRANGEMENTS
Section 1.1 Purchase Facility.
Upon the terms and subject to the conditions hereof, Seller may, at its
option, sell and assign Purchaser Interests to the Agent for the benefit of one
or more of the Purchasers. In accordance with the terms and conditions set forth
herein, Conduit may, at its option, instruct the Agent to purchase on behalf of
Conduit (or if Conduit shall decline to purchase, the Agent shall purchase, on
behalf of the Financial Institutions) Purchaser Interests from time to time in
an aggregate amount not to exceed the Purchase Limit during the period from the
date hereof to but not including the earlier to occur of the Revolving Period
Termination Date and the Facility Termination Date. Seller hereby assigns,
transfers and conveys to the Agent for the benefit of Conduit or the Financial
Institutions, as applicable, and the Agent hereby acquires, all of Seller's now
owned and existing and hereafter arising or acquired right, title and interest
in and to the Purchaser Interests.
Section 1.2 Increases.
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Seller shall provide the Agent with at least two Business Days' prior
notice in a form set forth as Exhibit II hereto of the Initial Purchase each
Incremental Purchase (a "Purchase Notice"). Each Purchase Notice shall be
subject to Section 6.2 hereof and, except as set forth below, shall be
irrevocable and shall specify the requested Purchase Price (which shall not be
less than $2,000,000) and date of purchase and, in the case of an Incremental
Purchase to be funded by the Financial Institutions, the requested Discount Rate
and Tranche Period. Each Purchase Notice shall include a Schedule of Receivables
for any Receivables either being sold under the Sale Agreement on the date of
such Incremental Purchase or which were sold under the Sale Agreement since the
date of the preceding Incremental Purchase. Seller may submit to the Agent no
more than two Purchase Notices during any Accrual Period. Following receipt of a
Purchase Notice, the Agent will determine whether Conduit agrees to make the
purchase. If Conduit declines to make a proposed purchase, Seller may cancel the
Purchase Notice or, in the absence of such a cancellation, the Incremental
Purchase of the Purchaser Interest will be made by the Financial Institutions.
On the date of each Incremental Purchase, upon satisfaction of the applicable
conditions precedent set forth in Article VI, Conduit or the Financial
Institutions, as applicable, shall deposit to the Facility Account, in
immediately available funds, no later than 12:00 noon (Chicago time), an amount
equal to (i) in the case of Conduit, the aggregate Purchase Price of the
Purchaser Interests Conduit is then purchasing or (ii) in the case of a
Financial Institution, such Financial Institution's Pro Rata Share of the
aggregate Purchase Price of the Purchaser Interests the Financial Institutions
are purchasing.
Section 1.3 Decreases.
On each Settlement Date prior to the Amortization Date, the Monthly
Available Funds shall be applied to reduce Capital (i) to the extent described
in clause fourth of Section 2.2(a) and (ii) to the extent determined by Seller,
to the extent Monthly Available Funds are available to be applied pursuant to
clause tenth of Section 2.2(a). On each Settlement Date on or following to the
Amortization Date, the Amortization Period Available Funds shall be applied to
reduce Capital to the extent described in clause fourth of Section 2.3. Servicer
shall include in the Monthly Report delivered pursuant to Section 8.5 on each
Monthly Report Date the amount of the Monthly Available Funds or Amortization
Period Available Funds, as applicable, that will be applied pursuant to Section
2.2 or Section 2.3, as applicable, to reduce Capital on the related Settlement
Date. All amounts paid pursuant to clauses fourth and sixth of Section 2.2(a)
and clause fourth of Section 2.3 shall be applied ratably to the Purchaser
Interests of Conduit and the Financial Institutions in accordance with the
amount of Capital (if any) owing to Conduit, on the one hand, and the amount of
Capital (if any) owing to the Financial Institutions (ratably, based on their
respective Pro Rata Shares), on the other hand.
Section 1.4 Payment Requirements.
All amounts to be paid or deposited by any Originating Party pursuant to
any provision of this Agreement shall be paid or deposited in accordance with
the terms hereof no later than 11:00 a.m. (Chicago time) on the day when due in
immediately available funds, and if not received before 11:00 a.m. (Chicago
time) shall be deemed to be received on the next succeeding Business Day. If
such amounts are payable to a Purchaser they shall be paid to the Agent, for the
account of such Purchaser, at 1 Bank One Plaza, Chicago, Illinois 60670 until
otherwise notified by the Agent. Upon written notice to Seller, the Agent may
debit the Facility Account for all amounts due and payable hereunder. All
computations of Yield, per annum fees calculated as part of any CP Costs, and
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per annum fees hereunder and under the Fee Letter shall be made on the basis of
a year of 360 days for the actual number of days elapsed. If any amount
hereunder shall be payable on a day which is not a Business Day, such amount
shall be payable on the next succeeding Business Day.
Section 1.5 Repurchase or Substitution for Charged-Off and Defaulted
Receivables.
(a) On any Settlement Date, Originator may, at its option, cause Agent to
convey back to Seller the interest of Agent in (x) to the extent permitted
pursuant to Section 1.5(d), any Receivable which constituted a Charged-Off
Receivable or a Defaulted Receivable as of the last day of the related Accrual
Period and (y) to the extent permitted by Section 1.5(f), any Vacation Credit
which constituted a Repossessed Vacation Credit as of the last day of the
related Accrual Period. Seller shall provide the Agent with irrevocable written
notice on the Monthly Report Date preceding such Settlement Date of its
intention to cause such reconveyance to occur, which notice shall (i) state the
amount of each form of consideration described in Sections 1.5(b) and 1.5(e)
which shall be paid to Agent on such Settlement Date, (ii) identify the
Charged-Off Receivables or Defaulted Receivables to be reconveyed to Seller and
(iii) otherwise be satisfactory in form and substance to Agent. On such
Settlement Date, Agent shall execute a Request for Release in accordance with
Section 2.10 for such Charged-Off Receivables or Defaulted Receivables, without
representation or warranty.
(b) As consideration for any reconveyance pursuant to Section 1.5(a)(x)
which occurs on a Settlement Date prior to the earlier to occur of the Revolving
Period Termination Date and the Amortization Date, Seller shall provide to
Agent, on behalf of the Purchasers:
(i) first, additional Purchaser Interests in Seller's existing
Receivables (so long as such additional Purchaser Interests do not
cause the aggregate Purchaser Interests to exceed 100%);
(ii) second, if the aggregate Purchaser Interests as described in
clause (i) would exceed 100%, then Seller shall acquire additional
Eligible Receivables pursuant to the Sale Agreement which will cause
the aggregate Purchaser Interests to be equal to or less than 100%, to
the extent that such Receivables are available to Seller (and in
compliance with all provisions in the Sale Agreement and in this
Agreement for the acquisition of Receivables, including the provisions
of Sections 2.10(a)); and
(iii) third, to the extent that the Purchaser Interests would
continue to exceed 100%, Seller shall pay to Agent, in immediately
available funds, an amount to be applied to reduce Capital such that
the Purchaser Interests shall not exceed 100%.
(c) As consideration for any reconveyance which occurs pursuant to Section
1.5(a)(x), on any Settlement Date on or following the earlier to occur of the
Revolving Period Termination Date and the Amortization Date, Seller shall
deposit into the Collection Account in immediately available funds, an amount
equal to 100% of the Outstanding Balance of such Receivable as of the last day
of the related Accrual Period.
(d) The aggregate Outstanding Balance of Receivables reconveyed pursuant to
Section 1.5(a)(x) shall (i) at no time exceed 10% of the result of (a) the
aggregate initial Outstanding Balance of all Receivables conveyed from the
Originator to the Seller on any RSA Purchase Date reduced by (b) the aggregate
Outstanding Balance of all Receivables subsequently reconveyed from the Seller
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to the Originator, and (ii) in no one year exceed $7,500,000. For purposes of
clause (ii) a "year" shall be measured from the date of closing or initial
purchase under this agreement or, for subsequent years, the anniversary of such
date.
(e) As consideration for any reconveyance pursuant to Section 1.5(a)(y) of
a Repossessed Vacation Credit, on the applicable Settlement Date, Seller shall
deposit into the Collection Account in immediately available funds an amount
equal to 25% of the original purchase price paid by the defaulting Obligor for
such Vacation Credit.
(f) Seller may not repurchase Repossessed Vacation Credits at any time
pursuant to Section 1.5(a)(y) unless each of the following conditions is
satisfied:
(i) either the Amortization Date or the Revolving Period
Termination Date has occurred;
(ii) Seller has theretofore repurchased the maximum amount of
Charged-off Receivables and Defaulted Receivables permitted to be
repurchased at such time pursuant to Sections 1.5(a)(x) and 1.5(d);
and
(iii) the aggregate Outstanding Balance of all Charged-off
Receivables and Defaulted Receivables related to Repossessed Vacation
Credits which have been repurchased pursuant to Section 1.5(a)(y),
including the Repossessed Vacation Credits to be repurchased on such
Settlement Date, does not exceed an amount equal to 5.0% of the
Outstanding Balance of Eligible Receivables as of the earlier to occur
of the Amortization Date and the Revolving Period Termination Date.
Seller may not repurchase any Repossessed Vacation Credits relating to a
Charged-off Receivable or a Defaulted Receivable unless Seller repurchases all
of the Repossessed Vacation Credits relating to such Charged-off Receivable or
Defaulted Receivable at such time.
(g) The rights of Seller pursuant to this Section 1.5 to repurchase
Charged-off Receivables, Defaulted Receivables and Repossessed Vacation Credits
shall be subject and subordinate to the rights of the Agent pursuant to Section
10.2 to sell, dispose or otherwise liquidate the Receivables and the Related
Security following the occurrence of an Amortization Event. Such rights of the
Seller shall not apply to any Charged-off Receivables, Defaulted Receivables or
Repossessed Vacation Credits which the Agent or any Servicer has sold, nor shall
they apply to any Charged-off Receivables, Defaulted Receivables or Repossessed
Vacation Credits as to which the Agent or any Servicer has provided at least
five Business Days prior notice to the Seller of its intention so to sell
(unless, prior to the expiration of such five Business Days, Seller has
irrevocably committed to purchase such Charged-off Receivables, Defaulted
Receivables or Repossessed Vacation Credits on the next succeeding Settlement
Date).
Section 1.6 Upgrades.
In connection with an Upgrade by an Obligor, (i) Seller shall acquire the
Upgrade Contract from Originator pursuant to the Sale Agreement, upon which
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acquisition each then outstanding Purchaser Interest shall include an interest
in the Receivable (the "Upgrade Receivable") represented by such Upgrade
Contract (and in the Related Security and Collections with respect to such
Upgrade Receivable) and (ii) upon such acquisition by Seller and compliance by
Seller with Section 2.10, Agent shall release all of its interests in the
existing Receivable (the "Pre-Upgrade Receivable") in respect of which such
Upgrade occurred.
ARTICLE II
PAYMENTS AND COLLECTIONS
Section 2.1 Payments.
Notwithstanding any limitation on recourse contained in this Agreement,
Seller shall immediately pay to the Agent when due, for the account of the
relevant Purchaser or Purchasers on a full recourse basis,
(a) such fees as set forth in the Fee Letter (which fees shall be
sufficient to pay all fees owing to the Financial Institutions);
(b) all amounts payable as Yield;
(c) all amounts payable as Deemed Collections (which shall be applied to
reduce outstanding Capital hereunder in accordance with Sections 2.2 and 2.3
hereof);
(d) all amounts payable pursuant to Article XI, if any;
(e) all Servicer costs and expenses in connection with servicing,
administering and collecting the Receivables (to the extent not paid directly to
the Servicer);
(f) all Broken Funding Costs;
(g) all Hedging Costs incurred by the Agent or the Purchasers; and
(h) all Default Fees (collectively, the "Obligations").
If any Person fails to pay any of the Obligations when due, such Person
agrees to pay, on demand, the Default Fee in respect thereof until paid.
Notwithstanding the foregoing, no provision of this Agreement or the Fee Letter
shall require the payment or permit the collection of any amounts hereunder in
excess of the maximum permitted by applicable law. If at any time Seller
receives any Collections or is deemed to receive any Collections, Seller shall
immediately deposit such Collections or Deemed Collections to the Collection
Account and, at all times prior to such payment, such Collections shall be held
in trust by Seller for the exclusive benefit of the Purchasers and the Agent.
Section 2.2 Distributions Prior to Amortization Date.
(a) On each Settlement Date prior to the Amortization Date, the Paying
Agent shall distribute all Monthly Available Funds with respect to the preceding
Accrual Period in the following order of priority, based upon the instructions
set forth in the Monthly Report prepared by the Servicer:
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first, if TWRI or one of its Affiliates is not then acting as the
Servicer, such Monthly Available Funds shall be applied to the payment
of the Successor Servicer fee;
second, any Monthly Available Funds remaining after the
application in clause first shall be applied to the reimbursement of
the Agent's costs of collection and enforcement of this Agreement;
third, any Monthly Available Funds remaining after the
applications in clauses first and second shall be applied ratably to
the payment of all accrued and unpaid fees under the Fee Letter, CP
Costs and Yield;
fourth, if the aggregate Purchaser Interests exceed 100% as of
the last day of the related Accrual Period, any Monthly Available
Funds remaining after the applications in clauses first through third
shall be paid to the Agent in reduction of Capital to the extent
necessary to reduce the aggregate Purchaser Interests to 100%;
fifth, any Monthly Available Funds remaining after the
applications in clauses first through fourth shall be applied ratably
for the ratable payment of all other unpaid Obligations (other than
Servicer fees and costs and Deemed Collections);
sixth, if the amount of Monthly Available Funds on deposit in the
Reserve Account is less than the Reserve Account Required Amount, any
Monthly Available Funds remaining after the applications in clauses
first through fifth shall be deposited in the Reserve Account until
the amount therein equals the Reserve Account Required Amount;
seventh, if a Hedge Accumulation Period is in effect, any Monthly
Available Funds remaining after the applications in clauses first
through sixth shall be deposited in the Hedge Account;
eighth, if an Amortization Event has occurred and is continuing,
but the Agent has not declared the Amortization Date to have occurred
pursuant to Section 10.2, then any Monthly Available Funds remaining
after the applications described in clauses first through seventh
shall be deposited in the Reserve Account;
ninth, any Monthly Available Funds remaining after the
applications in clauses first through eighth shall be applied ratably
for the payment to the Servicer of the servicing fee specified in
Section 8.6;
tenth, any Monthly Available Funds remaining after the
applications in clauses first through ninth shall be paid to the Agent
to effect a reduction of Capital, to the extent so specified in a
Monthly Report as provided in Section 1.3; and
eleventh, any Monthly Available Funds remaining after the
applications in clauses first through tenth shall be paid to the
Seller.
(b) If, on any Settlement Date prior to the Amortization Date, the Monthly
Available Funds available to be applied pursuant to Section 2.2(a) are less than
the amounts specified in clauses first through fifth of Section 2.2(a) (such
shortfall being a "Monthly Shortfall"), then the Paying Agent shall, as provided
in the Monthly Report, withdraw from the Reserve Account the lesser of (i) the
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Monthly Shortfall and (ii) the amount of funds in the Reserve Account, and shall
apply such withdrawn funds to unpaid amounts specified in clauses first through
fifth of Section 2.2(a), in the order of priority therein specified.
Section 2.3 Distributions Following Amortization Date.
On each Settlement Date on or following the Amortization Date, the Paying
Agent shall distribute all Amortization Period Available Funds with respect to
the preceding Accrual Period in the following order of priority, based upon the
instructions set forth in the Monthly Report prepared by the Servicer:
first, if TWRI or one of its Affiliates is not then acting as the
Servicer, such Amortization Period Available Funds shall be applied to
the payment of the Successor Servicer fee;
second, any Amortization Period Available Funds remaining after
the application in clause first shall be applied to the reimbursement
of the Agent's costs of collection and enforcement of this Agreement;
third, any Amortization Period Available Funds remaining after
the applications in clauses first and second shall be applied ratably
to the payment of all accrued and unpaid fees under the Fee Letter and
all CP Costs and Yield;
fourth, any Amortization Period Available Funds remaining after
the applications in clauses first through third shall be paid to the
Agent in reduction of Capital to the extent necessary to reduce
capital to zero;
fifth, any Amortization Period Available Funds remaining after
the applications in clauses first through fourth shall be applied
ratably for the ratable payment of all other unpaid Obligations (other
than Servicer costs and Deemed Collections) and other Aggregate
Unpaids;
sixth, if TWRI or one of its Affiliates is then acting as the
Servicer, any Amortization Period Available Funds remaining after the
applications in clauses first through fifth shall be applied ratably
for the payment of the servicing fee specified in Section 8.6; and
seventh, any Amortization Period Available Funds remaining after
the applications in clauses first through sixth shall be paid to the
Seller.
Section 2.4 Sharing of Applications.
Monthly Available Funds, Amortization Period Available Funds and other
amounts applied to the payment of Aggregate Unpaids pursuant to Section 2.2 and
Section 2.3 shall be distributed in accordance with the aforementioned
provisions, and, giving effect to each of the priorities set forth in such
Sections, shall be shared ratably (within each priority) among the Agent and the
Purchasers in accordance with the amount of such Aggregate Unpaids owing to each
of them in respect of each such priority.
Section 2.5 Payment Recission.
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No payment of any of the Aggregate Unpaids shall be considered paid or
applied hereunder to the extent that, at any time, all or any portion of such
payment or application is rescinded by application of law or judicial authority,
or must otherwise be returned or refunded for any reason. Seller shall remain
obligated for the amount of any payment or application so rescinded, returned or
refunded, and shall promptly pay to the Agent (for application to the Person or
Persons who suffered such recission, return or refund) the full amount thereof,
plus the Default Fee from the date of any such recission, return or refunding.
Section 2.6 Maintenance of Purchaser Interest.
Seller shall ensure that the Purchaser Interests of the Purchaser shall at
no time exceed 100%. If the aggregate of the Purchaser Interests of the
Purchasers exceeds 100%, Seller shall immediately pay to the Agent an amount to
be applied to reduce the Capital of the Purchaser Interests (as allocated by the
Agent), such that after giving effect to such payment the aggregate of the
Purchaser Interests equals or is less than 100%.
Section 2.7 Clean Up Call.
In addition to Seller's rights pursuant to Section 1.3 and Section 1.5,
Seller shall have the right (after providing written notice to the Agent in
accordance with the Required Notice Period), at any time following the reduction
of the Capital to a level that is less than 10.0% of the original Purchase
Limit, to repurchase from the Purchasers all, but not less than all, of the then
outstanding Purchaser Interests. The purchase price in respect thereof shall be
an amount equal to the Aggregate Unpaids through the date of such repurchase,
payable in immediately available funds. Such repurchase shall be without
representation, warranty or recourse of any kind by, on the part of, or against
any Purchaser or the Agent.
Section 2.8 Designated Accounts.
The Servicer shall establish the Reserve Account, the Hedge Account, and
the Collection Account (collectively, the "Designated Accounts") as follows:
(a) The Servicer, for the benefit of the Purchasers, shall establish and
maintain with the corporate trust department of the Paying Agent a trust account
bearing the designation "TW Holdings III, Inc. Reserve Account" (the "Reserve
Account") to include money and other property deposited and held therein
pursuant to Section 2.2 and Section 6.2. The Reserve Account shall be the
property of the Seller subject to the rights of the Agent in the property held
in the Reserve Account.
(b) The Servicer, for the benefit of the Purchasers, shall establish and
maintain with the corporate trust department of the Paying Agent a trust account
bearing the designation "TW Holdings III, Inc. Hedge Account" (the "Hedge
Account") to include money and other property deposited and held therein
pursuant to Section 2.2 and Section 9.4. The Hedge Account shall be the property
of the Seller subject to the rights of the Agent in the property held in the
Hedge Account.
(c) The Servicer, for the benefit of the Purchasers, shall establish and
maintain with the corporate trust department of the Paying Agent a trust account
bearing the designation "TW Holdings III, Inc. Collection Account" (the
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"Collection Account"). The Collection Account shall be the property of the
Seller subject to the rights of the Agent in the property held in the Collection
Account.
Section 2.9 Investment of Amounts in Designated Accounts.
The Servicer shall direct the Paying Agent, in writing, to invest the
amounts in each Designated Account in Eligible Investments which shall mature on
or before the next following Settlement Date; provided, however, it is
understood and agreed that the Paying Agent shall not be liable for any loss
arising from such investment in Eligible Investments or incurred as a result of
the liquidation of any investment prior to its stated maturity or the failure of
the Servicer to provide timely, written investment direction. In no event shall
the Paying Agent be liable for the selection of Eligible Investments. The Paying
Agent shall have no obligation to invest or reinvest any amounts held hereunder
in the absence of written investment direction. All such Eligible Investments
shall be held by the Paying Agent for the benefit of the Agent on behalf of the
Purchasers. Eligible Investments shall be selected that mature so that such
funds will be available at the opening of business on the day preceding the next
following Settlement Date. On the Business Day preceding each Settlement Date,
all interest and other investment income (net of losses and investment expenses)
on funds on deposit therein shall be withdrawn from each Designated Account and
shall be deposited in the Collection Account.
Section 2.10 Procedures for Substitution and Release of Receivables.
(a) The obligation of the Agent pursuant to Section 2.10(b) to release its
interests in Receivables described in clauses (i) and (ii) of the definition of
Released Receivables following the acquisition by Seller of (i) one or more
additional Eligible Receivables for the purpose specified in Section 1.5(a)(ii)
or (ii) an Upgrade Receivable as contemplated in Section 1.6 shall be subject to
the satisfaction by Seller, Originator and Custodian of the conditions precedent
specified in Section 15.1 and 15.2 on or before the RSA Purchase Date for any
such additional Eligible Receivable or Upgrade Receivable.
(b) The Agent shall release its interest in each Released Receivable and
the related Receivable Documents by executing and delivering to the Custodian a
request for release substantially in the form attached as Exhibit X (a "Request
for Release") prepared by the Servicer. Pursuant to such Request for Release,
the Agent shall assign to the Seller without representation or warranty and
without recourse its right, title and interest in such Released Receivable and
the related Receivable Documents. Upon such execution and delivery, such
Receivable will be released from the lien of the Agent and the Purchasers.
(c) (i) Upon satisfaction of the conditions precedent specified
in Section 2.10(c)(ii), the Agent ------------------- shall release
its interest in certain Receivables and the related Receivable
Documents from time to time following the delivery of a certificate of
the Seller (each a "Seller Direction"), substantially in the
---------------- form of Exhibit IV hereto. In connection with such
release, the Agent shall deliver a Request for ---------- Release to
the Custodian, pursuant to which the Agent shall assign without
recourse, representation or warranty its right, title, and interest in
such Receivables and the Related Receivable Documents. Upon the
execution and delivery of a Seller Direction and Request for Release
and satisfaction of the such conditions precedent, the applicable
Receivables shall be released from the lien of the Agent and the
Purchasers.
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(ii) The Agent shall not effect a release pursuant to Section
2.10(c)(i) unless each of the following conditions precedent has been
satisfied on or prior to the date of such release:
(A) No Hedge Event, Potential Amortization Event or Amortization
Even shall have occurred and be continuing or shall result from such
release; and
(B) the Seller shall have deposited into the Collection Account
in respect of such release an amount equal to the Outstanding Balance
of all such Receivables plus all accrued and unpaid interest thereon.
Section 2.11 Deemed Collections.
Seller hereby agrees to pay all Deemed Collections immediately to the
Servicer for application in accordance with the terms and conditions hereof.
Upon the payment in full of such Deemed Collections to the Agent, the Agent
shall release its interest in the related Diluted Receivable as provided in
Section 2.10(b).
ARTICLE III
CONDUIT FUNDING
Section 3.1 CP Costs.
Seller shall pay CP Costs with respect to the Capital associated with each
Purchaser Interest of Conduit for each day that any Capital in respect of such
Purchaser Interest is outstanding. Each Purchaser Interest funded substantially
with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis,
based upon the percentage share the Capital in respect of such Purchaser
Interest represents in relation to all assets held by Conduit and funded
substantially with Pooled Commercial Paper.
Section 3.2 CP Costs Payments.
On each Settlement Date, Seller shall pay to the Agent (for the benefit of
Conduit) an aggregate amount equal to all accrued and unpaid CP Costs in respect
of the Capital associated with all Purchaser Interests of Conduit for the
immediately preceding Accrual Period in accordance with Article II.
Section 3.3 Calculation of CP Costs and Carrying and Servicing Costs.
On each Determination Date, Conduit shall calculate the aggregate amount of
CP Costs for the applicable Accrual Period and Conduit or the Agent shall notify
the Seller and the Servicer of such aggregate amount. On each Determination
Date, the Agent shall calculate the amount of the Carrying and Servicing Costs
for the applicable Accrual Period and shall notify the Seller and the Servicer
of such amount.
ARTICLE IV
FINANCIAL INSTITUTION FUNDING
Section 4.1 Financial Institution Funding.
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Each Purchaser Interest of the Financial Institutions shall accrue Yield
for each day during its Tranche Period at either the LIBO Rate or the Prime Rate
in accordance with the terms and conditions hereof. Until Seller gives notice to
the Agent of another Discount Rate in accordance with Section 4.4, the initial
Discount Rate for any Purchaser Interest transferred to the Financial
Institutions pursuant to the terms and conditions hereof shall be the Prime
Rate. If the Financial Institutions acquire by assignment from Conduit any
Purchaser Interest pursuant to Article XIII, each Purchaser Interest so assigned
shall each be deemed to have a new Tranche Period commencing on the date of any
such assignment.
Section 4.2 Yield Payments.
On the Settlement Date for each Purchaser Interest of the Financial
Institutions, Seller shall pay to the Agent (for the benefit of the Financial
Institutions) an aggregate amount equal to the accrued and unpaid Yield for the
entire Tranche Period of each such Purchaser Interest in accordance with Article
II.
Section 4.3 Selection and Continuation of Tranche Periods.
(a) With consultation from (and approval by) the Agent, Seller shall from
time to time request Tranche Periods for the Purchaser Interests of the
Financial Institutions, provided that, if at any time the Financial Institutions
shall have a Purchaser Interest, Seller shall always request Tranche Periods
such that at least one Tranche Period shall end on the 20th day of each month
(or, if such day is not a Business Day, then on the next Business Day).
(b) Seller or the Agent may, effective on the last day of a Tranche Period
for any Purchaser Interest (a "Terminating Tranche"), divide any such Purchaser
Interest into multiple Purchaser Interests or combine any such Purchaser
Interest with one or more other Purchaser Interests which are either ending on
such day or are newly created on such day, provided that, in no event may a
Purchaser Interest of Conduit be combined with a Purchaser Interest of the
Financial Institutions.
Section 4.4 Financial Institution Discount Rates.
Seller may select the LIBO Rate or the Prime Rate for each Purchaser
Interest of the Financial Institutions. Seller shall by 11:00 a.m. (Chicago
time): (i) at least three (3) Business Days prior to the expiration of any
Terminating Tranche with respect to which the LIBO Rate is being requested as a
new Discount Rate and (ii) at least one (1) Business Day prior to the expiration
of any Terminating Tranche with respect to which the Prime Rate is being
requested as a new Discount Rate, give the Agent irrevocable notice of the new
Discount Rate for the Purchaser Interest associated with such Terminating
Tranche.
Section 4.5 Suspension of the LIBO Rate.
If any Financial Institution notifies the Agent that it has determined that
funding its Pro Rata Share of the Purchaser Interests of the Financial
Institutions at a LIBO Rate would violate any applicable law, rule, regulation,
or directive of any governmental or regulatory authority, whether or not having
the force of law, or that (i) deposits of a type and maturity appropriate to
match fund its Purchaser Interests at such LIBO Rate are not available or (ii)
such LIBO Rate does not accurately reflect the cost of acquiring or maintaining
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a Purchaser Interest at such LIBO Rate, then the Agent shall suspend the
availability of such LIBO Rate and require Seller to select the Prime Rate for
any Purchaser Interest accruing Yield at such LIBO Rate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of Originating Parties.
Each Originating Party hereby represents and warrants to the Agent and the
Purchasers, as to itself, and TWRI hereby represents as to WorldMark (to the
extent specific reference to WorldMark is made) that:
(a) Corporate Existence and Power. Such Originating Party is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and is duly qualified to do business and is in good
standing as a foreign corporation, and has and holds all corporate power and all
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is conducted, except
where the failure to so qualify or so hold could not reasonably be expected to
have a Material Adverse Effect.
(b) Power and Authority; Due Authorization Execution and Delivery. The
execution and delivery by such Originating Party of this Agreement and each
other Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and, in the case of Seller, Seller's use of
the proceeds of purchases made hereunder, are within its corporate powers and
authority and have been duly authorized by all necessary corporate action on its
part. This Agreement and each other Transaction Document to which such
Originating Party is a party has been duly executed and delivered by such
Originating Party.
(c) No Conflict. The execution and delivery by such Originating Party of
this Agreement and each other Transaction Document to which it is a party, and
the performance of its obligations hereunder and thereunder, do not contravene
or violate (i) its certificate or articles of incorporation or by-laws, (ii) any
law, Rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or by which it or any
of its property is bound, or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on assets of such Originating Party
or its Subsidiaries (except as created hereunder); and no transaction
contemplated hereby requires compliance with any bulk sales act or similar law.
(d) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution and delivery by such Originating Party of this
Agreement and each other Transaction Document to which it is a party and the
performance of its obligations hereunder and thereunder.
(e) Actions, Suits.
(i) There are no actions, suits or proceedings pending, or to the
best of such Originating Party's knowledge, threatened, against or
affecting Seller, or any of its properties, in or before any court,
arbitrator or other body.
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(ii) There are no actions, suits or proceedings pending, or to
the best of such Originating Party's knowledge, threatened, against or
affecting Servicer, or any of its or WorldMark's properties, in or
before any court, arbitrator or other body, that could be reasonably
expected to have a Material Adverse Effect.
(iii) Such Originating Party is not in default with respect to
any order of any court, arbitrator or governmental body.
(f) Binding Effect. This Agreement and each other Transaction Document to
which such Originating Party is a party constitute the legal, valid and binding
obligations of such Originating Party enforceable against such Originating Party
in accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(g) Accuracy of Information. All information heretofore furnished by such
Originating Party or any of its Affiliates to the Agent or the Purchasers for
purposes of or in connection with this Agreement, any of the other Transaction
Documents or any transaction contemplated hereby or thereby is, and all such
information hereafter furnished by such Originating Party or any of its
Affiliates to the Agent or the Purchasers will be, true and accurate in every
material respect on the date such information is stated or certified and does
not and will not contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
(h) Use of Proceeds. No proceeds of any purchase hereunder will be used (i)
for a purpose that violates, or would be inconsistent with, Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Good Title. Immediately prior to each purchase hereunder, Seller shall
be the legal and beneficial owner of the Receivables and Related Security with
respect thereto, free and clear of any Adverse Claim, except as created by the
Transaction Documents. There have been duly filed all financing statements or
other similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect Seller's ownership
interest in each Receivable, its Collections and the Related Security.
(j) Perfection. This Agreement, together with the filing of the financing
statements contemplated hereby, is effective to, and shall, upon each purchase
hereunder, transfer to the relevant Purchaser or Purchasers (and such Purchaser
or Purchasers shall acquire from Seller) a valid and perfected first priority
undivided percentage ownership interest in each Receivable existing or hereafter
arising and in the Related Security and Collections with respect thereto, free
and clear of any Adverse Claim, except as created
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by the Transaction Documents. There have been duly filed all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Agent's (on
behalf of the Purchasers) ownership interest in the Receivables, the Related
Security and the Collections.
(k) Places of Business. The principal places of business and chief
executive office of such Originating Party and the offices where it keeps all of
its Records are located at the address(es) listed on Exhibit III or such other
locations of which the Agent has been notified in accordance with Section 7.2(a)
in jurisdictions where all action required by Section 15.4(a) has been taken and
completed. Seller's Federal Employer Identification Number is correctly set
forth on Exhibit III.
(l) Collections. The conditions and requirements set forth in Section 8.2
have at all times been satisfied and duly performed. The name and address of the
bank with which the Clearing Account is established, together with the account
numbers of the Clearing Account and the Collection Account, are listed on
Exhibit XII.
(m) Material Adverse Effect. Since June 30, 1999, no event has occurred
that would have a Material Adverse Effect, including a Material Adverse Effect
regarding the collectibility of the Receivables.
(n) Names. In the past five (5) years, Seller has not used any corporate
names, trade names or assumed names other than the name in which it has executed
this Agreement.
(o) Ownership of Seller. The Originator owns, directly or indirectly, 100%
of the issued and outstanding capital stock of Seller, free and clear of any
Adverse Claim. Such capital stock is validly issued, fully paid and
nonassessable, and there are no options, warrants or other rights to acquire
securities of Seller.
(p) Not a Holding Company or an Investment Company. Such Originating Party
is not a "holding company" or a "subsidiary holding company" of a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or any successor statute. Such Originating Party is not an
"investment compa ny" within the meaning of the Investment Company Act of 1940,
as amended, or any successor statute.
(q) Compliance with Law. Such Originating Party has complied in all
respects with all applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject. Each Receivable,
together with the Contract related thereto, does not contravene any laws, rules
or regulations applicable thereto (including laws, rules and regulations
relating to truth in lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy), and no part of
such Contract is in violation of any such law, Rule or regulation.
(r) Compliance with Credit and Collection Policy. Such Originating Party
has complied in all material respects with the Credit and Collection Policy with
regard to each Receivable and the related Contract, and has not made any
material change to such Credit and Collection Policy, except such material
change as to which the Agent has been notified in accordance with Section
7.1(a)(v).
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(s) Payments to Originator. With respect to each Receivable transferred to
Seller under the Sale Agreement, Seller has given reasonably equivalent value to
the Originator in consideration therefor, and such transfer was not made for or
on account of an antecedent debt. No transfer by the Originator of any
Receivable under the Sale Agreement is or may be voidable under any Section of
the Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended.
(t) Enforceability of Contracts. Each Contract with respect to each
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the related Obligor to pay the Outstanding Balance of the
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the Net Receivables
Balance as an Eligible Receivable on the RSA Purchase Date was an Eligible
Receivable on such RSA Purchase Date.
(v) Net Receivables Balance. Immediately after giving effect to each
purchase hereunder, the Net Receivables Balance is at least equal to the sum of
(i) the aggregate Capital of all the Purchaser Interests, plus (ii) the
Aggregate Reserves.
(w) Year 2000. Such Originating Party (i) has reviewed the areas within its
business and operations which could be adversely affected by the Year 2000
Problem, (ii) has developed a Year 2000 Plan to address the Year 2000 Problem on
a timely basis, (iii) is taking all actions necessary to meet the Schedule and
goals of the Year 2000 Plan and (iv) has established adequate reserves to
implement the Year 2000 Plan. Such Originating Party does not reasonably
anticipate that the Year 2000 Problem could have a Material Adverse Effect.
(x) Accounting. The manner in which such Originating Party accounts for the
transactions contemplated by this Agreement and the Sale Agreement does not
jeopardize the true sale analysis.
(y) Title to Properties. WorldMark, directly or beneficially, owns good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of its business,
except for such defects in title as could not, individually or in the aggregate,
have a Material Adverse Effect. As of the date of closing or initial purchase
under this agreement, the real and personal property of the Seller is subject to
no Liens, other than Liens created under the Transaction Documents.
(z) Liabilities of WorldMark. World Mark:
(i) has not voluntarily incurred or at any time become
voluntarily liable for any Indebtedness;
(ii) has not voluntarily allowed its property to become subject
to any Liens, nor is any of its property subject to any Liens, other
than (a) utility or other easements or licenses unrelated to any debt
of WorldMark or (b) Liens that in do not exceed, in aggregate,
$100,000; and
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(iii) has not involuntarily incurred and is not involuntarily
liable for any debt, nor is any of its property involuntarily subject
to any Liens (other than utility or similar easements or licenses
unrelated to any debt of 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.
(aa) Environmental Matters. TWRI has conducted its operations and kept and
maintained its property in compliance with all Environmental Laws. TWRI has
performed its duties under its management agreement with WorldMark in material
compliance with all Environmental Laws.
(bb) No Subsidiaries of WorldMark. WorldMark has no subsidiaries.
(cc) Conformity of Receivable Documents. The information set forth on each
Schedule of Receivables is accurate and is consistent with the terms of the
related Receivable Documents delivered to the Custodian.
(dd) Insurance. Originator in its individual capacity and as property
manager for WorldMark maintains in effect, or causes to be maintained in effect,
such property, casualty and liability insurance covering its and WorldMark's
real property and personal property as Originator deems appropriate in its good
faith business judgement.
(ee) Compliance with Representations. On and as of the date of each
purchase of a Purchaser Interest hereunder, each Originating Party hereby
represents and warrants that all of the other representations and warranties
made by it set forth in this Section 5.1 are true and correct on and as of the
date of such purchase (and after giving effect to such purchase) as though made
on and as of each such date.
Section 5.2 Financial Institution Representations and Warranties.
Each Financial Institution hereby represents and warrants to the Agent and
Conduit that:
(a) Existence and Power. Such Financial Institution is a corporation or a
banking association duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization, and has all
corporate power to perform its obligations hereunder.
(b) No Conflict. The execution and delivery by such Financial Institution
of this Agreement and the performance of its obligations hereunder are within
its corporate powers, have been duly authorized by all necessary corporate
action, do not contravene or violate (i) its certificate or articles of
incorporation or association or by-laws, (ii) any law, Rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or any of its property is bound, or (iv) any
order, writ, judgment, award, injunction or decree binding on or affecting it or
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its property, and do not result in the creation or imposition of any Adverse
Claim on its assets. This Agreement has been duly authorized, executed and
delivered by such Financial Institution.
(c) Governmental Authorization. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by such Financial
Institution of this Agreement and the performance of its obligations hereunder.
(d) Binding Effect. This Agreement constitutes the legal, valid and binding
obligation of such Financial Institution enforceable against such Financial
Institution in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
ARTICLE VI
CONDITIONS OF PURCHASES
Section 6.1 Conditions Precedent to Initial Purchase.
The initial purchase of a Purchaser Interest under this Agreement is
subject to the conditions precedent that
(a) the Agent shall have received on or before the date of such purchase
those documents listed on Schedule B, and
(b) the Agent shall have received all fees and expenses required to be paid
on such date pursuant to the terms of this Agreement and the Fee Letter.
Section 6.2 Conditions Precedent to All Purchases.
Each purchase of a Purchaser Interest (other than pursuant to Section 13.1)
shall be subject to the further conditions precedent that:
(a) the Purchaser shall have delivered to the Agent a Purchase Notice, as
specified in Section 1.2;
(b) in the case of each such purchase: the Servicer shall have delivered to
the Agent on or prior to the date of such purchase, in form and substance
satisfactory to the Agent, all Monthly Reports as and when due under Section
8.5, and, upon the Agent's request, the Servicer shall have delivered to the
Agent at least three (3) days prior to such purchase an interim Monthly Report
showing the amount of Eligible Receivables;
(c) the representations and warranties of the Seller made in Section 5.1
are true and correct on and as of the date of such purchase as though made on
and as of such date;
(d) the Facility Termination Date shall not have occurred, the aggregate
Capital of all Purchaser Interests shall not exceed the Purchase Limit and the
aggregate Purchaser Interests shall not exceed 100%;
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(e) no event has occurred and is continuing, or would result from such
purchase that constitutes or would constitute an Amortization Event, a Potential
Amortization Event, or an Excess Aged Receivables Event;
(f) all actions and conditions specified in Article XV of this Agreement
which are to be taken or satisfied on or prior to an RSA Purchase Date shall
have been fully performed or satisfied;
(g) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request;
(h) the amount of funds in the Reserve Account (including any funds
deposited therein by Seller in connection with such Purchase) shall equal at
least the Reserve Fund Required Amount following such Incremental Purchase; and
(i) the Facility Termination Date shall not have occurred.
ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants of the Originating Parties.
Until the date on which the Aggregate Unpaids have been indefeasibly paid
in full and this Agreement terminates in accordance with its terms, each
Originating Party hereby covenants, as to itself, as set forth below:
(a) Financial Reporting. Such Originating Party will maintain, for itself
and each of its Subsidiaries, a system of accounting established and
administered in accordance with GAAP, and furnish to the Agent:
(i) Annual Reporting. (a) For TWRI, within 90 days after the
close of each of its fiscal years, audited, ----------------
unqualified financial statements (which shall include balance sheets,
statements of income and retained earnings and a statement of cash
flows) certified in accordance with GAAP by any Big 5 Accounting Firm
or any other independent public accountants acceptable to the Seller
and Agent, (b) for the Seller, within 90 days after the close of each
of its fiscal years, unaudited, unqualified financial statements
(which may be internally prepared and shall include balance sheets and
statements of income) certified by an Authorized Officer, and (c) for
WorldMark, within 120 days after the close of each of its fiscal years
audited, unqualified financial statements (which shall include balance
sheets, statements of income and retained earnings and a statement of
cash flows) for such fiscal year certified in accordance with GAAP by
any independent public accountants acceptable to the Seller and Agent
(including Molatore, Pugh, McDaniel, Scroggin & Co., LLP).
(ii) Quarterly Reporting. Within 45 days after the close of the
first three (3) quarterly periods of each of ------------------- its
respective fiscal years, (a) for TWRI a balance sheet as at the close
of each such period and statements of income and retained earnings and
a statement of cash flows for the period from the beginning of such
fiscal year to the end of such quarter, all certified by an Authorized
Officer, and (b) for the Seller and World Mark, balance sheets of as
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at the close of each such period and statements of income for the
period from the beginning of such fiscal year to the end of such
quarter, all certified by an Authorized Officer. All quarterly reports
delivered to pursuant to this Section 7.1(a)(ii) may be unaudited and
internally prepared. -------------------
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate in
substantially the form of Exhibit V signed by Seller's Authorized
Officer and dated the date of such annual financial statement or such
quarterly financial statement, as the case may be, together with
copies of the certificates of TWRI and WorldMark delivered pursuant to
Section 4.1(a)(iii) of the Sale Agreement.
(iv) Shareholders Statements and Reports. Promptly upon the
furnishings thereof to the shareholders of Originator or its
Affiliates, copies of all financial statements, reports and proxy
statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, copies of
all registration statements and annual, quarterly, monthly or other
regular reports which Originator or its Affiliates or any of their
Subsidiaries may from time to time file with the Securities and
Exchange Commission.
(vi) Copies of Notices. Promptly upon its receipt of any notice,
request for consent, financial statements, certification, report or
other communication under or in connection with any Transaction
Document from any Person other than the Agent or Conduit, copies of
the same.
(vii) Change in Credit and Collection Policy. At least thirty
(30) days prior to the effectiveness of any material change in or
amendment to the Credit and Collection Policy, a copy of the Credit
and Collection Policy then in effect and a notice indicating such
change or amendment.
(viii) Other Information. Promptly, from time to time, such other
information, documents, records or reports relating to the Receivables
or the condition or operations, financial or otherwise, of Seller as
the Agent may from time to time reasonably request in order to protect
the interests of the Agent and the Purchasers under or as contemplated
by this Agreement.
(b) Notices. Seller will notify the Agent in writing of any of the
following promptly upon learning of the occurrence thereof, describing the same
and, if applicable, the steps being taken with respect thereto;
(c) Trigger Events. The occurrence of each Amortization Event, Potential
Amortization Event, Hedge Event and Excess Aged Receivables Event, by a
statement of an Authorized Officer of Seller.
(i) Judgment and Proceedings.
(A) The entry of any (1) judgment or decree against the Servicer,
WorldMark or any of their respective Subsidiaries if the aggregate
amount of all judgments and decrees then outstanding against the
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Servicer, WorldMark or their Subsidiaries exceeds $1,000,000, or (2)
any judgment whatsoever against the Seller.
(B) The institution of (1) any litigation, arbitration proceeding
or governmental proceeding against Seller, or (2) any material
litigation, arbitration proceeding or governmental proceeding against
Servicer, any of its Subsidiaries, or WorldMark.
(ii) Material Adverse Effect. The occurrence of any event or
condition that has, or could reasonably be expected to have, a
Material Adverse Effect, including a Material Adverse Effect on the
collectibility of the Receivables.
(iii) Amortization Date. The occurrence of the "Amortization
Date" under the Sale Agreement.
(iv) Defaults Under Other Agreements. The occurrence of an event
of default under any other material financing arrangement pursuant to
which such Originating Party is a debtor or an obligor.
(v) Downgrade of the Originator. Any downgrade in the rating of
any Indebtedness or asset backed security of the Originator, or any of
its Subsidiaries or Affiliates, as applicable or as may become
applicable, by any nationally recognized rating agency, setting forth
the Indebtedness or asset backed security affected and the nature of
such change.
(vi) Default by Custodian. The occurrence of a default or event
of default under Article XV or any other provision of this Agreement
by the Custodian.
(d) Compliance with Laws and Preservation of Corporate Existence. Such
Originating Party will comply in all material respects with all applicable laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject. Such Originating Party will preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where its business is conducted.
(e) Audits.
(i) Such Originating Party will furnish to the Agent from time to
time such information with respect to it and the Receivables as the
Agent may reasonably request. Such Originating Party will, from time
to time during regular business hours as requested by the Agent upon
reasonable notice permit the Agent, or its agents or representatives,
(x) to examine and make copies of and abstracts from all Records in
the possession or under the control of such Person relating to the
Receivables and the Related Security, including the related Contracts,
and (y) to visit the offices and properties of such Person for the
purpose of examining such materials described in clause (x) above, and
to discuss matters relating to such Person's financial condition or
the Receivables and the Related Security or any Person's performance
under any of the Transaction Documents or any Person's performance
under the Contracts and, in each case, with any of the officers or
employees of Seller or the Servicer having knowledge of such matters.
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(ii) The cost of audits conducted pursuant to this Section 7.1(d)
shall be borne by such Originating Party (x) once per calendar year
and (y) at any time when an Amortization Event has occurred and is
continuing.
(f) Keeping and Marking of Records and Books.
(i) The Servicer will maintain and implement administrative and
operating procedures (including an ability to recreate records
evidencing Receivables in the event of the destruction of the
originals thereof), and will keep and maintain (or will cause the
Custodian to keep and maintain) all documents, books, records and
other information reasonably necessary or advisable for the collection
of all Receivables (including records adequate to permit the immediate
identification of each new Receivable and all Collections of and
adjustments to each existing Receivable). The Servicer will give the
Agent notice of any material change in the administrative and
operating procedures referred to in the previous sentence.
(ii) Such Originating Party will (a) on or prior to the date
hereof, mark its master data processing records and other books and
records relating to the Purchaser Interests with a legend, acceptable
to the Agent, describing the Purchaser Interests and (b) upon the
request of the Agent (x) mark each Contract with a legend describing
the Purchaser Interests and (y) deliver to the Custodian all Contracts
(including all multiple originals of any such Contract) relating to
the Receivables.
(g) Compliance with Contracts and Credit and Collection Policy. Such
Originating Party will timely and fully (i) perform and comply with all
provisions, covenants and other promises required to be observed by it under the
Contracts related to the Receivables, and (ii) comply in all respects with the
Credit and Collection Policy in regard to each Receivable and the related
Contract. Seller will pay when due any taxes payable in connection with the
Receivables, exclusive of taxes on or measured by income or gross receipts of
Conduit, the Agent or any Financial Institution.
(h) Performance and Enforcement of Sale Agreement. Seller shall, and shall
require the Originator to, perform each of their respective obligations and
undertakings under and pursuant to the Sale Agreement, shall purchase
Receivables thereunder in strict compliance with the terms thereof and shall
vigorously enforce the rights and remedies accorded to Seller under the Sale
Agreement. Seller shall take all actions to perfect and enforce its rights and
interests (and the rights and interests of the Agent and the Purchasers as
assignees of Seller) under the Sale Agreement as the Agent may from time to time
reasonably request, including making claims to which it may be entitled under
any indemnity, reimbursement or similar provision contained in the Sale
Agreement.
(i) Performance and Enforcement of Custodian Duties. Seller shall, and
shall require the Custodian to, perform each of their respective obligations and
undertakings under and pursuant to Article XV of this Agreement and shall
vigorously enforce the rights and remedies accorded to Seller under Article XV
of this Agreement. Seller shall take all actions to perfect and enforce its
rights and interests (and the rights and interests of the Agent and the
Purchasers as assignees of Seller) under Article XV of this Agreement as the
Agent may from time to time reasonably request, including making claims to which
it may be entitled under any indemnity, reimbursement or similar provision
contained in Article XV of this Agreement.
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(j) Ownership. Seller shall take all necessary action to (i) vest legal and
equitable title to the Receivables, the Related Security and the Collections
purchased under the Sale Agreement irrevocably in Seller, free and clear of any
Adverse Claims other than Adverse Claims in favor of the Agent and the
Purchasers (including the filing of all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect Seller's interest in such Receivables,
Related Security and Collections and such other action to perfect, protect or
more fully evidence the interest of Seller therein as the Agent may reasonably
request), and (ii) establish and maintain, in favor of the Agent, for the
benefit of the Purchasers, a valid and perfected first priority undivided
percentage ownership interest (and/or a valid and perfected first priority
security interest) in all Receivables, Related Security and Collections to the
full extent contemplated herein, free and clear of any Adverse Claims other than
Adverse Claims in favor of the Agent for the benefit of the Purchasers
(including the filing of all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect the Agent's interest in such Receivables, Related
Security and Collections and such other action to perfect, protect or more fully
evidence the interest of the Agent as the Agent may reasonably request).
(k) Purchasers' Reliance. Seller acknowledges that the Purchasers are
entering into the transactions contemplated by this Agreement in reliance upon
Seller's identity as a legal entity that is separate from the Originator.
Therefore, from and after the date of execution and delivery of this Agreement,
Seller shall take all reasonable steps, including all steps that the Agent or
any Purchaser may from time to time reasonably request, to maintain Seller's
identity as a separate legal entity and to make it manifest to third parties
that Seller is an entity with assets and liabilities distinct from those of the
Originator and any Affiliates thereof and not just a division of the Originator.
Without limiting the generality of the foregoing and in addition to the other
covenants set forth herein, Seller shall:
(i) engage in only the acquisition, ownership, selling, reselling
(under the circumstances contemplated by this Agreement) and pledging
of the property acquired from the Originator pursuant to the Sale
Agreement (including the ability to enter into a new installment
contract with an Obligor pursuant to an Upgrade), and causing the
issuance and sale of Purchaser Interests pursuant to this Agreement
and the exercise of any powers permitted to corporations under the
General Corporation Law of the State of Delaware, which are incidental
to the foregoing or necessary to accomplish the foregoing;
(ii) maintain its books and records separate from the books and
records of any other entity, and maintain separate bank accounts where
no funds of the Seller shall be commingled with funds of any other
entity;
(iii) keep in full effect its existence, rights and franchises as
a corporation under the laws of the State of Delaware and 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;
(iv) conduct its business from an office or office space separate
from the offices of Originator and WorldMark and maintain a telephone
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number separate from those of Originator and WorldMark and operate its
business generally so as not to be substantively consolidated with any
of its Affiliates;
(v) not own any subsidiary or lend or advance any moneys to or
make an investment in, any Person, or make any capital expenditures;
(vi) not (1) dissolve or liquidate in whole or in part, commence
any case, proceeding or other action under any existing or future
bankruptcy, insolvency or similar law seeking to have an order for
relief entered with respect to it, or seeking reorganization,
arrangement, adjustment, wind-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, (2) seek
appointment of a receiver, Paying Agent, custodian or other similar
official for it or any part of its assets, (3) make a general
assignment for the benefit of creditors (other than as contemplated
herein), or (4) take any action in furtherance of, or consenting or
acquiescing in, any of the foregoing;
(vii) not guarantee (directly or indirectly), endorse or
otherwise become contingently liable (directly or indirectly) for the
obligations of, or own or purchase any stock, obligations or
securities of or any other interest in, or make any capital
contribution to, any other Person;
(viii) not merge or consolidate with any other Person;
(ix) not engage in any other action that adversely affects
whether the separate legal identity of the Originator will be
respected, including holding itself out as being liable for the debts
of any other party or acting other than in its corporate name and
through its duly authorized officers or agents;
(x) not create, incur, assume, or in any manner become liable in
respect of any indebtedness other than that contemplated herein or
trade payables and expense accruals incurred in the ordinary course of
business and which are incidental to its business purpose;
(xi) at all times have a Board of Directors of three to seven
members, which consists of at least one director who is an Independent
Director, and have at least one executive officer who is an
Independent Officer; provided, however, that (a) such Independent
Director may also be the Independent Officer and (b) such Independent
Director and such Independent Officer may serve in similar capacities
for other "special purpose entities" formed by Originator and its
Affiliates; Seller's Certificate of Incorporation shall at all times
provide that such Independent Director shall have a fiduciary duty to
the Purchasers;
(xii) compensate all employees, consultants and agents directly,
from Seller's bank accounts, for services provided to Seller by such
employees, consultants and agents and, to the extent any employee,
consultant or agent of Seller is also an employee, consultant or agent
of the Originator, allocate the compensation of such employee,
consultant or agent between Seller and the Originator on a basis that
reflects the services rendered to Seller and the Originator;
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(xiii) conduct all transactions with the Originator and the
Servicer (including any delegation of its obligations hereunder as
Servicer) strictly on an arm's-length basis, allocate all overhead
expenses (including telephone and other utility charges) for items
shared between Seller and the Originator on the basis of actual use to
the extent practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to actual use;
(xiv) observe all corporate formalities as a distinct entity, and
ensure that all corporate actions relating to (a) the selection,
maintenance or replacement of the Independent Director, (b) the
dissolution or liquidation of Seller or (c) the initiation of,
participation in, acquiescence in or consent to any bankruptcy,
insolvency, reorganization or similar proceeding involving Seller, are
duly authorized by unanimous vote of its Board of Directors (including
the Independent Director);
(xv) prepare its financial statements separately from those of
the Originator and insure that any consolidated financial statements
of the Originator or any Affiliate thereof that include Seller have
notes clearly stating that Seller is a separate corporate entity and
that its assets will be available first and foremost to satisfy the
claims of the creditors of Seller and will not be available to satisfy
the claims of the creditors of Originator;
(xvi) pay all of Seller's operating expenses from the Seller's
own assets (except for certain payments by the Originator or other
Persons pursuant to allocation arrangements that comply with the
requirements of this Section 7.1(j));
(xvii) maintain the effectiveness of, and continue to perform
under the Sale Agreement, such that it does not amend, restate,
supplement, cancel, terminate or otherwise modify the Sale Agreement,
or give any consent, waiver, directive or approval thereunder or waive
any default, action, omission or breach under the Sale Agreement or
otherwise grant any indulgence thereunder, without (in each case) the
prior written consent of the Agent;
(xviii) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion issued
by Chapman and Cutler as counsel for Seller, in connection with the
closing or initial purchase under this Agreement and relating to
substantive consolidation issues, and in the certificates accompanying
such opinion, remain true and correct in all material respects at all
times.
(l) Taxes. Such Originating Party shall file all tax returns and reports
required by law to be filed by it and shall promptly pay all taxes and
governmental charges at any time owing.
(m) Insurance. Seller shall maintain in effect, or cause to be maintained
in effect, at Seller's own expense, such property, casualty and liability
insurance covering the Originating Parties' real property and personal property
as Seller shall deem appropriate in its good faith business judgment. The
foregoing requirements shall not be construed to negate, reduce or modify, and
are in addition to, Seller's obligations hereunder.
(n) Environmental Laws. TWRI shall, and shall cause each of its
Subsidiaries to conduct its operations and keep and maintain its property in
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compliance with all Environmental Laws. TWRI shall perform its duties under its
management agreement with WorldMark in compliance with all Environmental Laws.
Section 7.2 Negative Covenants of the Originating Parties.
Until the date on which the Aggregate Unpaids have been indefeasibly paid
in full and this Agreement terminates in accordance with its terms, each
Originating Party hereby covenants, as to itself, that:
(a) Name Change, Offices and Records. Such Originating Party will not
change its name, identity or corporate structure (within the meaning of Section
9-402(7) of any applicable enactment of the UCC) or relocate its chief executive
office or any office where Records are kept unless it shall have: (i) given the
Agent at least forty-five (45) days' prior written notice thereof and (ii)
delivered to the Agent all financing statements, instruments and other documents
requested by the Agent in connection with such change or relocation.
(b) Modifications to Contracts and Credit and Collection Policy. Such
Originating Party will not make any change to the Credit and Collection Policy
that could adversely affect the collectibility of the Receivables or decrease
the credit quality of any newly created Receivables. Except as provided in
Section 8.2(e), the Servicer will not extend, amend or otherwise modify the
terms of any Receivable or any Contract related thereto other than in accordance
with the Credit and Collection Policy.
(c) Sales, Liens. Seller shall not sell, assign (by operation of law or
otherwise) otherwise dispose of, grant any option with respect to, create or
suffer to exist any Adverse Claim upon (including the filing of any financing
statement) or with respect to any Receivable, Related Security or Collections,
or upon or with respect to any Contract under which any Receivable arises, or
any Collection Account, or assign any right to receive income with respect
thereto (other than, in each case, the creation of the interests therein in
favor of the Agent and the Purchasers provided for herein). Seller shall defend
the right, title and interest of the Agent and the Purchasers in, to and under
any of the foregoing property, against all claims of third parties claiming
through or under Seller or the Originator. However, no part of this Section
7.2(c) shall be construed as prohibiting an assignment pursuant to Section 2.10
or Section 13.1 of this Agreement.
(d) Net Receivables Balance. At no time prior to the Amortization Date
shall Seller permit the Net Receivables Balance to be less than an amount equal
to the sum of (i) the aggregate Capital of all the Purchaser Interests plus (ii)
the Aggregate Reserves.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
Section 8.1 Designation of Servicer.
(a) The servicing, administration and collection of the Receivables shall
be conducted by such Person (the "Servicer") so designated from time to time in
accordance with this Section 8.1. TWRI is hereby designated as, and hereby
agrees to perform the duties and obligations of, the Servicer pursuant to the
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terms of this Agreement. The Agent may at any time following the occurrence and
during the continuation of a Servicer Default designate as Servicer any Person
to succeed TWRI or any successor Servicer.
(b) TWRI shall not be permitted to delegate any of its duties or
responsibilities as Servicer to any Person other than (i) with respect to
Charged-Off Receivables, outside collection agencies in accordance with its
customary practices and (ii) with the prior written consent of the Agent (such
consent not to be unreasonably withheld), any sub-servicer appointed by the
Servicer. If at any time the Agent shall designate as Servicer any Person other
than TWRI, all duties and responsibilities theretofore delegated by TWRI to any
sub-servicer may, at the discretion of the Agent, be terminated forthwith on
notice given by the Agent to TWRI and to such sub-servicer.
(c) Notwithstanding the foregoing subSection (b), as long as TWRI or its
Subsidiary or Affiliate is Servicer,
(i) TWRI shall be and remain primarily liable to the Agent and
the Purchasers for the full and prompt performance of all duties and
responsibilities of the Servicer hereunder, and
(ii) the Agent and the Purchasers shall be entitled to deal
exclusively with TWRI in matters relating to the discharge by the
Servicer of its duties and responsibilities hereunder. The Agent and
the Purchasers shall not be required to give notice, demand or other
communication to any Person other than TWRI in order for communication
to the Servicer and its sub-servicer or other delegate with respect
thereto to be accomplished. TWRI, at all times that it is the
Servicer, shall be responsible for providing any sub-servicer or other
delegate of the Servicer with any notice given to the Servicer under
this Agreement.
Section 8.2 Duties of Servicer.
(a) The Servicer shall take or cause to be taken all such actions as may be
necessary or advisable to collect each Receivable from time to time, all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence, and in accordance with the Credit and Collection Policy.
(b) The Servicer shall cause each Obligor to remit his or her payments to a
clearing account (the "Clearing Account") established at Commerce Bank of
Washington or another bank acceptable to the Agent in its sole discretion. The
Servicer shall cause any payments made by Automatic Debit Collection to be
deposited directly into the Clearing Account from each Obligor's relevant
account. On each Business Day, the Servicer shall cause the Custodian to remit
all amounts on deposit in the Clearing Account related to the Receivables to be
remitted to the Collection Account.
(c) The Servicer shall hold in trust for the benefit of the Agent any
payments it receives in respect of the Receivables until such time as it shall
transfer such payments to the Clearing Account. Any amounts held in the Clearing
Account in respect of the Receivables shall be held in trust for the benefit of
the Agent.
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(d) The Servicer shall administer and cause the Custodian to administer the
Collections in accordance with the procedures described herein, in Article II
and in Article XV.
(e) The Servicer may, in accordance with the Credit and Collection Policy,
extend the maturity of any Receivable or adjust the Outstanding Balance of any
Receivable as the Servicer determines to be appropriate to maximize Collections
thereof; provided, however, that such extension or adjustment shall not alter
the status of such Receivable as a Delinquent Receivable, a Defaulted Receivable
or a Charged-Off Receivable or limit the rights of the Agent or the Purchasers
under this Agreement. Notwithstanding anything to the contrary contained herein,
the Agent shall have the absolute and unlimited right to direct the Servicer to
commence or settle any legal action with respect to any Delinquent Receivable,
Defaulted Receivable or Charged-Off Receivable or to foreclose upon or repossess
any Related Security (including any Vacation Credits).
(f) Any payment by an Obligor in respect of any Indebtedness owed by it to
the Originator or Seller shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless otherwise instructed by the
Agent, be applied as a Collection of any Receivable of such Obligor (starting
with the oldest such Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other receivable or other
obligation of such Obligor.
(g) The Servicer shall instruct the Paying Agent in writing to make
withdrawals and payments from Collection Account for the purposes of carrying
out the Servicer's duties hereunder.
Section 8.3 Collections Following an Amortization Event.
Seller hereby authorizes the Agent, and agrees that, upon and following the
occurrence of an Amortization Event, the Agent shall be entitled to (i) endorse
Seller's name on checks and other instruments representing Collections, (ii)
enforce the Receivables, the related Contracts and the Related Security, and
(iii) take such action as shall be necessary or desirable to cause all cash,
checks and other instruments constituting Collections of Receivables to come
into the possession of the Agent rather than Seller.
Section 8.4 Responsibilities of Seller.
Anything herein to the contrary notwithstanding, the exercise by the Agent
and the Purchasers of their rights hereunder shall not release the Servicer, the
Originator or Seller from any of their duties or obligations with respect to any
Receivables or under the related Contracts. The Purchasers shall have no
obligation or liability with respect to any Receivables or related Contracts,
nor shall any of them be obligated to perform the obligations of Seller.
Section 8.5 Reports.
The Servicer shall prepare and forward to the Agent and the Paying Agent:
(a) on the 15th day of each month (or, if such day is not a Business Day,
then the next Business Day) and at such other times as the Agent shall request,
a Monthly Report, which shall include a certification by the Servicer that all
Representations and Warranties contained in Section 5.1 are true as of that
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date, and to the extent the Representations and Warranties contained in Section
5.1 are not true as of that date, a detailed description of the facts and
circumstances that have caused any of the Representations or Warranties to be
untrue as of that date.
(b) at such times as the Agent shall request, a listing by Obligor of all
Receivables together with an aging of such Receivables.
Section 8.6 Servicing Fees.
In consideration of TWRI's agreement to act as Servicer hereunder, the
Purchasers hereby agree that, so long as TWRI shall continue to perform as
Servicer hereunder, the Seller shall pay over to TWRI a servicing fee, as and to
the extent provided in Article II. Such servicing fee shall be payable on each
Settlement Date for the preceding Accrual Period in an amount equal to the
lesser of (x) the product of (i) one-twelfth, (ii) 1.75%, and (iii) the daily
average outstanding amount of Capital during such Accrual Period and (y) the
amount of funds available for payment of such servicing fee pursuant to Article
II.
Section 8.7 TWRI Financial Covenants.
For so long as TWRI is the Servicer, TWRI covenants that:
(a) It shall maintain, as of the close of each of its fiscal quarters, an
Interest Coverage Ratio of not less than 6.0 to 1.0.
(b) It shall maintain, as of the close of each of its fiscal quarters, a
Capitalization Ratio of not greater than 1.0 to 2.0.
(c) Notwithstanding the foregoing, for so long as the Agent is a party to
the Credit Agreement, the definitions in this Agreement of "Interest Coverage
Ratio" and "Capitalization Ratio," and the requisite ratios, shall be
automatically amended, modified or waived mutatis mutandis upon any amendment,
modification or any waiver of the equivalent definitions or ratios under the
Credit Agreement.
ARTICLE IX
HEDGING
Section 9.1 Hedge Event.
A Hedge Event shall occur if, for any Accrual Period, the Gross Excess
Spread Percentage shall be less than 4.75%.
Section 9.2 Hedge Accumulation Period.
(a) Following the occurrence of a Hedge Event, funds shall be deposited
into the Hedge Account to the extent provided in Section 2.2(a) beginning on the
first Settlement Date thereafter and ending on the first to occur of (i) the
Hedge Event Cure Date and (ii) the Amortization Date (such period, the "Hedge
Accumulation Period").
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(b) On any day during the Hedge Accumulation Period, the Agent shall be
entitled to withdraw any or all of the available funds in the Hedge Account and
use such funds for the purpose of acquiring one or more Purchased Hedges.
(c) If the Hedge Accumulation Period terminates as a result of the
occurrence of the Hedge Event Cure Date, then all funds in the Hedge Account on
such date shall be deposited in the Collection Account and treated as part of
the Monthly Available Funds. If the Hedge Accumulation Period terminates as a
result of the occurrence of the Amortization Date, then at the election of the
Agent, funds in the Hedge Account on such date shall be (x) deposited in the
Collection Account and treated as part of the Amortization Period Available
Funds or (y) retained in the Hedge Account for use in acquiring one or more
Purchased Hedges.
ARTICLE X
AMORTIZATION EVENTS
Section 10.1 Amortization Events.
The occurrence of any one or more of the following events shall constitute
an Amortization Event:
(a) Any Originating Party shall fail (i) to make any payment or deposit
required hereunder when due, or (ii) to perform or observe any term, covenant or
agreement hereunder (other than as referred to in clause (i) of this paragraph
(a) or in paragraph (k) below) and such failure in the case of this clause (ii)
shall continue for three (3) consecutive Business Days.
(b) Any representation, warranty, certification or statement made by any
Originating Party in this Agreement, any other Transaction Document or in any
other document delivered pursuant hereto or thereto shall prove to have been
incorrect when made or deemed made, and the effects of such have not been cured
within three business days after the date the representation, warranty,
certification or statement was discovered, or should have been discovered, not
to have been correct.
(c) Failure of Seller to pay any Indebtedness when due or the failure of
any other Originating Party to pay any Indebtedness greater than $1,000,000 when
due; or the default by any Originating Party in the performance of any term,
provision or condition contained in any agreement under which any such
Indebtedness greater than $1,000,000 was created or is governed, the effect of
which is to cause, or to permit the holder or holders of such Indebtedness to
cause, such Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of any Originating Party shall be declared to be due and payable or
required to be prepaid (other than by a regularly scheduled payment) prior to
the date of maturity thereof.
(d) (i) Any Originating Party or any of its Subsidiaries shall generally
not pay its debts as such debts become due or shall admit in writing its
inability to pay its debts generally or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against any
Originating Party or any of its Subsidiaries seeking to adjudicate it bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
paying agent or other similar official for it or any substantial part of its
property or (ii) any Originating Party or any of their Subsidiaries shall take
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any corporate action to authorize any of the actions set forth in clause (i)
above in this subSection (d).
(e) WorldMark:
(i) voluntarily incurs or at any time become voluntarily liable
for any Indebtedness;
(ii) voluntarily allows its property to become subject to any
Liens, or subjects any of its property to any Liens, other than (a)
utility or other easements or licenses unrelated to any debt of
WorldMark or (b) Liens that in do not exceed, in aggregate, $100,000;
or
(iii) involuntarily incurs or becomes involuntarily liable for
any debt, or subjects any of its property involuntarily to any Liens
(other than utility or similar easements or licenses unrelated to any
debt of 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.
(f) As at the end of any Accrual Period, the Three-Month Average
Delinquency Ratio shall exceed 5.0%.
(g) As at the end of any Accrual Period, the Three-Month Average
Consolidated Delinquency Ratio shall exceed 5.0%.
(h) As at the end of any Accrual Period, the Three-Month Average Default
Ratio shall exceed 3.0%.
(i) As at the end of any Accrual Period, the Three-Month Average
Consolidated Default Ratio shall exceed 3.0%.
(j) As of the end of any Accrual Period, the Net Excess Spread Percentage
shall be less than or equal to zero.
(k) As of the end of any Accrual Period, the Three-Month Average Charge-
Off Ratio shall exceed 5.0%.
(l) As of the end of any Accrual Period, the Three-Month Average
Consolidated Charge-Off Ratio shall exceed 5.0%.
(m) A Hedge Event shall occur and shall continue to exist for six
consecutive months.
(n) The aggregate number of Units decreases to less than 90% of the number
of units in existence on the date of closing or initial purchase under this
Agreement.
(o) As of the end of any fiscal quarter of TWRI at any time that TWRI is
the Servicer, TWRI shall not be in compliance with one or more of the financial
covenants set forth in Section 8.7 of this Agreement.
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(p) One or more final judgments for the payment of money shall be entered
against Seller on claims not covered by insurance or as to which the insurance
carrier has denied its responsibility, and such judgment shall continue
unsatisfied and in effect for fifteen (15) consecutive days without a stay of
execution.
(q) This Agreement shall terminate in whole or in part (except in
accordance with its terms), or shall cease to be effective or to be the legally
valid, binding and enforceable obligation of Seller, or any Obligor shall
directly or indirectly contest in any manner such effectiveness, validity,
binding nature or enforceability, or the Agent for the benefit of the Purchasers
shall cease to have a valid and perfected first priority security interest in
the Receivables, the Related Security, and the Collections with respect thereto
and the Collection Accounts.
(r) The aggregate Purchaser Interests shall exceed 100% and shall continue
as such until the earlier of (i) one Business Day following the date any
Originating Party has actual knowledge thereof and (ii) the next Settlement
Date.
(s) The "Amortization Date" shall occur under the Sale Agreement or the
Originator shall for any reason cease to transfer, or cease to have the legal
capacity to transfer, or otherwise be incapable of transferring Receivables to
Seller under the Sale Agreement.
(t) Seller at any time becomes less than a 100% wholly owned subsidiary of
Originator.
(u) For any Accrual Period, Collections received by means of Automatic
Debit Collection during such Accrual Period shall be less than 50.0% of the
total Collections received during such Accrual Period.
(v) A date shall occur which is the earliest of (i) any date following the
occurrence of the Revolving Period Termination Date upon which (x) the Default
Ratio or the Consolidated Default Ratio as of the end of the preceding Accrual
Period exceeds 2.25% or (y) the Delinquency Ratio or the Consolidated
Delinquency Ratio as of the end of the preceding Accrual Period exceeds 4.25%,
(ii) the first anniversary of the occurrence of the Revolving Period Termination
Date, and (iii) the Facility Termination Date.
(w) A date shall occur which is the 90th day following the earlier to occur
of (i) a public announcement of a Change of Control and (ii) the occurrence of a
Change of Control.
Section 10.2 Remedies.
Upon the occurrence and during the continuation of an Amortization Event,
funds shall be deposited into the Reserve Account to the extent provided in
Section 2.2, and the Agent may, or upon the direction of the Required Financial
Institutions shall, take any of the following actions: (i) replace the Person
then acting as Servicer, (ii) declare the Amortization Date to have occurred,
whereupon the Amortization Date shall forthwith occur, without demand, protest
or further notice of any kind, all of which are hereby expressly waived by each
Originating Party; provided, however, that upon the occurrence of an
Amortization Event described in Section 10.1(d), or of an actual or deemed entry
of an order for relief with respect to any Originating Party under the Federal
Bankruptcy Code, the Amortization Date shall automatically occur, without
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demand, protest or any notice of any kind, all of which are hereby expressly
waived by each Originating Party, (iii) to the fullest extent permitted by
applicable law, declare that the Default Fee shall accrue with respect to any of
the Aggregate Unpaids outstanding at such time, (iv) acquire one or more
Purchased Hedges, (v) notify Obligors of the Purchasers' interest in the
Receivables and (vi) sell, dispose of or otherwise liquidate the Receivables or
the Related Security in a commercially reasonable manner and on commercially
reasonable terms. If the Amortization Date has occurred, all amounts on deposit
in the Reserve Account shall be deposited in the Collection Account and treated
as part of the Amortization Period Available Funds. The aforementioned rights
and remedies shall be in addition to all other rights and remedies of the Agent
and the Purchasers available under this Agreement, by operation of law, at
equity or otherwise, all of which are hereby expressly preserved, including all
rights and remedies provided under the UCC, all of which rights shall be
cumulative.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnities by the Originating Parties.
Without limiting any other rights that the Agent or any Purchaser may have
hereunder or under applicable law, (a) Seller hereby agrees to indemnify (and
pay upon demand to) the Agent and each Purchaser and their respective assigns,
officers, directors, agents and employees (each an "Indemnified Party") from and
against any and all damages, losses, claims, taxes, liabilities, costs, expenses
and for all other amounts payable, including reasonable attorneys' fees (which
attorneys may be employees of the Agent or such Purchaser) and disbursements
(all of the foregoing being collectively referred to as "Indemnified Amounts")
awarded against or incurred by any of them arising out of or as a result of this
Agreement or the acquisition, either directly or indirectly, by a Purchaser of
an interest in the Receivables, and (b) the Servicer hereby agrees to indemnify
(and pay upon demand) each Indemnified Party for Indemnified Amounts awarded
against or incurred by any of them arising out of the Servicer's activities as
Servicer hereunder, excluding, however, in all of the foregoing instances under
the preceding clauses (A) and (B):
(i) Indemnified Amounts to the extent a final judgment of a court
of competent jurisdiction holds that such Indemnified Amounts resulted
from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes losses
in respect of Receivables that are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or
(iii) taxes imposed by the jurisdiction in which such Indemnified
Party's principal executive office is located, on or measured by the
overall net income of such Indemnified Party to the extent that the
computation of such taxes is consistent with the Intended
Characterization;
provided, however, that nothing contained in this sentence shall limit the
liability of any Originating Party or limit the recourse of the Purchasers to
any Originating Party for amounts otherwise specifically provided to be paid by
such Originating Party under the terms of this Agreement. Without limiting the
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generality of the foregoing indemnification, Seller shall indemnify the Agent
and the Purchasers for Indemnified Amounts (including losses in respect of
uncollectible receivables, regardless of whether reimbursement therefor would
constitute recourse to Seller or the Servicer) relating to or resulting from:
(iv) any representation or warranty made by any Originating
Party, the Originator or the Custodian (or any officers of any such
Person) under or in connection with this Agreement, any other
Transaction Document or any other information or report delivered by
any such Person pursuant hereto or thereto, which shall have been
false or incorrect when made or deemed made;
(v) the failure by any Seller, the Servicer, the Originator,
WorldMark or the Custodian to comply with any applicable law, Rule or
regulation with respect to any Receivable or Contract related thereto,
or the nonconformity of any Receivable or Contract included therein
with any such applicable law, Rule or regulation or any failure of the
Originator, WorldMark or the Custodian to keep or perform any of their
respective obligations, express or implied, with respect to any
Contract; (vi) any failure of Seller, the Servicer, the Originator or
the Custodian to perform its duties, covenants or other obligations in
accordance with the provisions of this Agreement or any other
Transaction Document;
(vii) any lawsuit or legal claim arising out of or in connection
with the Resorts and Units, any defect in WorldMark's ownership of
title to, or leasehold rights in, the real property used in its
business, any Obligor's right to use the Resorts and Units, or any
rights or services that are the subject of any Contract;
(viii) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable (including a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the services or rights
related to such Receivable or the furnishing or failure to provide for
such rights or furnish such services;
(ix) the commingling of Collections of Receivables at any time
with other funds;
(x) any investigation, litigation or proceeding related to or
arising from this Agreement or any other Transaction Document, the
transactions contemplated hereby, the use of the proceeds of a
purchase, the ownership of the Purchaser Interests or any other
investigation, litigation or proceeding relating to Seller, the
Servicer or the Originator in which any Indemnified Party becomes
involved as a result of any of the transactions contemplated hereby;
(xi) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor being immune
from civil and commercial law and suit on the grounds of sovereignty
or otherwise from any legal action, suit or proceeding;
(xii) any Amortization Event described in Section 10.1(d);
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(xiii) any failure of Seller to acquire and maintain legal and
equitable title to, and ownership of any Receivable and the Related
Security and Collections with respect thereto from the Originator,
free and clear of any Adverse Claim (other than as created hereunder);
or any failure of Seller to give reasonably equivalent value to the
Originator under the Sale Agreement in consideration of the transfer
by the Originator of any Receivable, or any attempt by any Person to
void such transfer under statutory provisions or common law or
equitable action;
(xiv) any failure to vest and maintain vested in the Agent and
the Purchasers, or to transfer to the Agent and the Purchasers, legal
and equitable title to, and ownership of, a first priority undivided
percentage ownership (to the extent of the Purchaser Interests
contemplated hereunder) in the Receivables, the Related Security and
the Collections, free and clear of any Adverse Claim;
(xv) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivable, the Related Security and Collections with respect
thereto, and the proceeds of any thereof, whether at the time of any
Incremental Purchase or at any subsequent time;
(xvi) any action or omission by any Originating Party which
reduces or impairs the rights of the Agent or the Purchasers with
respect to any Receivable or the value of any such Receivable;
(xvii) any attempt by any Person to void any Incremental Purchase
hereunder under statutory provisions or common law or equitable
action; and
(xviii) the Year 2000 Problem with respect to the Originating
Parties.
Any Indemnified Amounts incurred by actions of the Custodian shall be payable by
the Custodian to the Agent no later than the 30th day after a demand for payment
of the Buyer is delivered to the Custodian. Any such Indemnified Amounts not
paid by such date shall be immediately payable by the Originator to the Buyer.
Section 11.2 Increased Cost and Reduced Return.
If after the date hereof, any Funding Source shall be charged any fee,
expense or increased cost on account of the adoption of any applicable law, Rule
or regulation (including any applicable law, Rule or regulation regarding
capital adequacy) or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency: (i) that subjects any Funding
Source to any charge or withholding on or with respect to any Funding Agreement
or a Funding Source's obligations under a Funding Agreement, or on or with
respect to the Receivables, or changes the basis of taxation of payments to any
Funding Source of any amounts payable under any Funding Agreement (except for
changes in the rate of tax on the overall net income of a Funding Source) or
(ii) that imposes, modifies or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of a Funding Source, or credit extended by a
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Funding Source pursuant to a Funding Agreement or (iii) that imposes any other
condition the result of which is to increase the cost to a Funding Source of
performing its obligations under a Funding Agreement, or to reduce the rate of
return on a Funding Source's capital as a consequence of its obligations under a
Funding Agreement, or to reduce the amount of any sum received or receivable by
a Funding Source under a Funding Agreement or to require any payment calculated
by reference to the amount of interests or loans held or interest received by
it, then within 10 days, upon written demand by the Agent, Seller shall pay to
the Agent, for the benefit of the relevant Funding Source, such amounts charged
to such Funding Source or compensate such Funding Source for such reduction.
Section 11.3 Other Costs and Expenses.
Seller shall pay to the Agent and Conduit within 30 days, upon written
demand all costs and out-of-pocket expenses in connection with the preparation,
execution, delivery and administration of this Agreement, the transactions
contemplated hereby and the other documents to be delivered hereunder, including
the cost of Conduit's auditors auditing the books, records and procedures of
Seller, reasonable fees and out-of-pocket expenses of legal counsel for Conduit
and the Agent (which such counsel may be employees of Conduit or the Agent) with
respect thereto and with respect to advising Conduit and the Agent as to their
respective rights and remedies under this Agreement. Seller shall pay to the
Agent on demand any and all costs and expenses of the Agent and the Purchasers,
if any, including reasonable counsel fees and expenses in connection with the
enforcement of this Agreement and the other documents delivered hereunder and in
connection with any restructuring or workout of this Agreement or such
documents, or the administration of this Agreement following an Amortization
Event. Seller shall reimburse Conduit on demand for all other costs and expenses
incurred by Conduit ("Other Costs"), including the cost of auditing Conduit's
books by certified public accountants, the cost of rating the Commercial Paper
by independent financial rating agencies, and the reasonable fees and
out-of-pocket expenses of counsel for Conduit or any counsel for any shareholder
of Conduit with respect to advising Conduit or such shareholder as to matters
relating to Conduit's operations.
Section 11.4 Allocations.
Conduit shall allocate the liability for Other Costs among Seller and other
Persons with whom Conduit has entered into agreements to purchase interests in
receivables ("Other Sellers"). If any Other Costs are attributable to Seller and
not attributable to any Other Seller, Seller shall be solely liable for such
Other Costs. However, if Other Costs are attributable to Other Sellers and not
attributable to Seller, such Other Sellers shall be solely liable for such Other
Costs. All allocations to be made pursuant to the foregoing provisions of this
Article XI shall be made by Conduit in its sole discretion and shall be binding
on Seller and the Servicer.
ARTICLE XII
THE AGENT
Section 12.1 Authorization and Action.
Each Purchaser hereby designates and appoints Bank One to act as its agent
hereunder and under each other Transaction Document, and authorizes the Agent to
take such actions as agent on its behalf and to exercise such powers as are
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delegated to the Agent by the terms of this Agreement and the other Transaction
Documents together with such powers as are reasonably incidental thereto. The
Agent shall not have any duties or responsibilities, except those expressly set
forth herein or in any other Transaction Document, or any fiduciary relationship
with any Purchaser, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities on the part of the Agent shall be read into
this Agreement or any other Transaction Document or otherwise exist for the
Agent. In performing its functions and duties hereunder and under the other
Transaction Documents, the Agent shall act solely as agent for the Purchasers
and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for any Originating Party or any of such
Originating Party's successors or assigns. The Agent shall not be required to
take any action that exposes the Agent to personal liability or that is contrary
to this Agreement, any other Transaction Document or applicable law. The
appointment and authority of the Agent hereunder shall terminate upon the
indefeasible payment in full of all Aggregate Unpaids. Each Purchaser hereby
authorizes the Agent to execute each of the Uniform Commercial Code financing
statements on behalf of such Purchaser (the terms of which shall be binding on
such Purchaser).
Section 12.2 Delegation of Duties.
The Agent may execute any of its duties under this Agreement and each other
Transaction Document by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.
Section 12.3 Exculpatory Provisions.
Neither the Agent nor any of its directors, officers, agents or employees
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or them under or in connection with this Agreement or any other Transaction
Document (except for its, their or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any of the Purchasers for any
recitals, statements, representations or warranties made by any Originating
Party contained in this Agreement, any other Transaction Document or any
certificate, report, statement or other document referred to or provided for in,
or received under or in connection with, this Agreement, or any other
Transaction Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any other Transaction
Document or any other document furnished in connection herewith or therewith, or
for any failure of any Originating Party to perform its obligations hereunder or
thereunder, or for the satisfaction of any condition specified in Article VI, or
for the perfection, priority, condition, value or sufficiency of any collateral
pledged in connection herewith. The Agent shall not be under any obligation to
any Purchaser to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, this
Agreement or any other Transaction Document, or to inspect the properties, books
or records of the Originating Parties. The Agent shall not be deemed to have
knowledge of any Amortization Event or Potential Amortization Event unless the
Agent has received notice from Seller or a Purchaser.
Section 12.4 Reliance by Agent.
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The Agent shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including counsel to
Seller), independent accountants and other experts selected by the Agent. The
Agent shall in all cases be fully justified in failing or refusing to take any
action under this Agreement or any other Transaction Document unless it shall
first receive such advice or concurrence of Conduit or the Required Financial
Institutions or all of the Purchasers, as applicable, as it deems appropriate
and it shall first be indemnified to its satisfaction by the Purchasers,
provided that unless and until the Agent shall have received such advice, the
Agent may take or refrain from taking any action, as the Agent shall deem
advisable and in the best interests of the Purchasers. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, in accordance
with a request of Conduit or the Required Financial Institutions or all of the
Purchasers, as applicable, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Purchasers.
Section 12.5 Non-Reliance on Agent and Other Purchasers.
Each Purchaser expressly acknowledges that neither the Agent, nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent
hereafter taken, including any review of the affairs of any Originating Party,
shall be deemed to constitute any representation or warranty by the Agent. Each
Purchaser represents and warrants to the Agent that it has and will,
independently and without reliance upon the Agent or any other Purchaser and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of Seller and
made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.
Section 12.6 Reimbursement and Indemnification.
The Financial Institutions agree to reimburse and indemnify the Agent and
its officers, directors, employees, representatives and agents ratably according
to their Pro Rata Shares, to the extent not paid or reimbursed by the
Originating Parties (i) for any amounts for which the Agent, acting in its
capacity as Agent, is entitled to reimbursement by the Originating Parties
hereunder and (ii) for any other expenses incurred by the Agent, in its capacity
as Agent and acting on behalf of the Purchasers, in connection with the
administration and enforcement of this Agreement and the other Transaction
Documents.
Section 12.7 Agent in its Individual Capacity.
The Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with Seller or any Affiliate of Seller
as though the Agent were not the Agent hereunder. With respect to the
acquisition of Purchaser Interests pursuant to this Agreement, the Agent shall
have the same rights and powers under this Agreement in its individual capacity
as any Purchaser and may exercise the same as though it were not the Agent, and
the terms "Financial Institution," "Purchaser," "Financial Institutions" and
"Purchasers" shall include the Agent in its individual capacity.
Section 12.8 Successor Agent.
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The Agent may, upon five days' notice to Seller and the Purchasers, and the
Agent will, upon the direction of all of the Purchasers (other than the Agent,
in its individual capacity) resign as Agent. If the Agent shall resign, then the
Required Financial Institutions during such five-day period shall appoint from
among the Purchasers a successor agent. If for any reason no successor Agent is
appointed by the Required Financial Institutions during such five-day period,
then effective upon the termination of such five day period, the Purchasers
shall perform all of the duties of the Agent hereunder and under the other
Transaction Documents and Seller and the Servicer (as applicable) shall make all
payments in respect of the Aggregate Unpaids directly to the applicable
Purchasers and for all purposes shall deal directly with the Purchasers. After
the effectiveness of any retiring Agent's resignation hereunder as Agent, the
retiring Agent shall be discharged from its duties and obligations hereunder and
under the other Transaction Documents and the provisions of this Article XII and
Article XI shall continue in effect for its benefit with respect to any actions
taken or omitted to be taken by it while it was Agent under this Agreement and
under the other Transaction Documents.
ARTICLE XIII
ASSIGNMENTS; PARTICIPATIONS
Section 13.1 Assignments.
(a) Seller and each Financial Institution hereby agree and consent to the
complete or partial assignment by Conduit of all or any portion of its rights
under, interest in, title to and obligations under this Agreement to the
Financial Institutions pursuant to Section 13.1 or to any other Person, and upon
such assignment, Conduit shall be released from its obligations so assigned.
Further, Seller and each Financial Institution hereby agree that any assignee of
Conduit of this Agreement or all or any of the Purchaser Interests of Conduit
shall have all of the rights and benefits under this Agreement as if the term
"Conduit" explicitly referred to such party, and no such assignment shall in any
way impair the rights and benefits of Conduit hereunder. Neither the Seller nor
the Servicer shall have the right to assign its rights or obligations under this
Agreement.
(b) Any Financial Institution may at any time and from time to time assign
to one or more Persons ("Purchasing Financial Institutions") all or any part of
its rights and obligations under this Agreement pursuant to an assignment
agreement, substantially in the form set forth in Exhibit VII hereto (the
"Assignment Agreement") executed by such Purchasing Financial Institution and
such selling Financial Institution. The consent of Conduit shall be required
prior to the effectiveness of any such assignment. Each assignee of a Financial
Institution must have a short-term debt rating of A-1 or better by S&P and P-1
by Moody's and must agree to deliver to the Agent, promptly following any
request therefor by the Agent or Conduit, an enforceability opinion in form and
substance satisfactory to the Agent and Conduit. Upon delivery of the executed
Assignment Agreement to the Agent,
(c) such selling Financial Institution shall be released from its
obligations hereunder to the extent of such assignment. Thereafter the
Purchasing Financial Institution shall for all purposes be an Financial
Institution party to this Agreement and shall have all the rights and
obligations of an Financial Institution under this Agreement to the same extent
as if it were an original party hereto and no further consent or action by
Seller, the Purchasers or the Agent shall be required.
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(d) Each of the Financial Institutions agrees that in the event that it
shall cease to have a short-term debt rating of A-1 or better by S&P and P-1 by
Moody's (an "Affected Financial Institution"), such Affected Financial
Institution shall be obliged, at the request of Conduit or the Agent, to assign
all of its rights and obligations hereunder to (x) another Financial Institution
or (y) another funding entity nominated by the Agent and acceptable to Conduit,
and willing to participate in this Agreement through the Liquidity Termination
Date in the place of such Affected Financial Institution; provided that the
Affected Financial Institution receives payment in full, pursuant to an
Assignment Agreement, of an amount equal to such Financial Institution's Pro
Rata Share of the Capital and Yield owing to the Financial Institutions and all
accrued but unpaid fees and other costs and expenses payable in respect of its
Pro Rata Share of the Purchaser Interests of the Financial Institutions.
Section 13.2 Participations.
Any Financial Institution may, in the ordinary course of its business at
any time sell to one or more Persons (each a "Participant") participating
interests in its Pro Rata Share of the Purchaser Interests of the Financial
Institutions, its obligation to pay Conduit its Acquisition Amounts or any other
interest of such Financial Institution hereunder. Notwithstanding any such sale
by a Financial Institution of a participating interest to a Participant, such
Financial Institution's rights and obligations under this Agreement shall remain
unchanged, such Financial Institution shall remain solely responsible for the
performance of its obligations hereunder, and Seller, Conduit and the Agent
shall continue to deal solely and directly with such Financial Institution in
connection with such Financial Institution's rights and obligations under this
Agreement. Each Financial Institution agrees that any agreement between such
Financial Institution and any such Participant in respect of such participating
interest shall not restrict such Financial Institution's right to agree to any
amendment, supplement, waiver or modification to this Agreement, except for any
amendment, supplement, waiver or modification described in Section 16.1(b)(i).
ARTICLE XIV
LIQUIDITY FACILITY
Section 14.1 Transfer to Financial Institutions.
Each Financial Institution hereby agrees, subject to Section 14.4, that
immediately upon written notice from Conduit delivered on or prior to the
Liquidity Termination Date, it shall acquire by assignment from Conduit, without
recourse or warranty, its Pro Rata Share of one or more of the Purchaser
Interests of Conduit as specified by Conduit. Each such assignment by Conduit
shall be made pro rata among the Financial Institutions, provided, however, that
Conduit may at any time and from time to time, in its sole and absolute
discretion, make any such assignment to any Affected Financial Institution on a
non-pro rata basis. Each Financial Institution shall, no later than 1:00 p.m.
(Chicago time) on the date of such assignment, pay in immediately available
funds to the Agent at an account designated by the Agent, for the benefit of
Conduit, its Acquisition Amount. Unless an Financial Institution has notified
the Agent that it does not intend to pay its Acquisition Amount, the Agent may
assume that such payment has been made and may, but shall not be obligated to,
make the amount of such payment available to Conduit in reliance upon such
assumption. Conduit hereby sells and assigns to the Agent for the ratable
benefit of the Financial Institutions, and the Agent hereby purchases and
assumes from Conduit, effective upon the receipt by Conduit of the Conduit
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Transfer Price, the Purchaser Interests of Conduit which are the subject of any
transfer pursuant to this Article XIII.
Section 14.2 Transfer Price Reduction Yield.
If the Adjusted Liquidity Price is included in the calculation of the
Conduit Transfer Price for any Purchaser Interest, each Financial Institution
agrees that the Agent shall pay to Conduit the Reduction Percentage of any Yield
received by the Agent with respect to such Purchaser Interest.
Section 14.3 Payments to Conduit.
In consideration for the reduction of the Conduit Transfer Prices by the
Conduit Transfer Price Reductions, effective only at such time as the aggregate
amount of the Capital of the Purchaser Interests of the Financial Institutions
equals the Conduit Residual, each Financial Institution hereby agrees that the
Agent shall not distribute to the Financial Institutions and shall immediately
remit to Conduit any Yield, Collections or other payments received by it to be
applied pursuant to the terms hereof or otherwise to reduce the Capital of the
Purchaser Interests of the Financial Institutions.
Section 14.4 Limitation on Commitment to Purchase from Conduit.
Notwithstanding anything to the contrary in this Agreement, no Financial
Institution shall have any obligation to purchase any Purchaser Interest from
Conduit, pursuant to Section 14.1 or otherwise, if:
(i) Conduit shall have voluntarily commenced any proceeding or
filed any petition under any bankruptcy, insolvency or similar law
seeking the dissolution, liquidation or reorganization of Conduit or
taken any corporate action for the purpose of effectuating any of the
foregoing; or
(ii) involuntary proceedings or an involuntary petition shall
have been commenced or filed against Conduit by any Person under any
bankruptcy, insolvency or similar law seeking the dissolution,
liquidation or reorganization of Conduit and such proceeding or
petition shall have not been dismissed.
Section 14.5 Defaulting Financial Institutions.
If one or more Financial Institutions defaults in its obligation to pay its
Acquisition Amount pursuant to Section 13.1 (each such Financial Institution
shall be called a "Defaulting Financial Institution" and the aggregate amount of
such defaulted obligations being herein called the "Conduit Transfer Price
Deficit"), then upon notice from the Agent, each Financial Institution other
than the Defaulting Financial Institutions (a "Non-Defaulting Financial
Institution") shall promptly pay to the Agent, in immediately available funds,
an amount equal to the lesser of (x) such Non-Defaulting Financial Institution's
proportionate share (based upon the relative Commitments of the Non-Defaulting
Financial Institutions) of the Conduit Transfer Price Deficit and (y) the unused
portion of such Non-Defaulting Financial Institution's Commitment. A Defaulting
Financial Institution shall forthwith upon demand pay to the Agent for the
account of the Non-Defaulting Financial Institutions all amounts paid by each
Non-Defaulting Financial Institution on behalf of such Defaulting Financial
Institution, together with interest thereon, for each day from the date a
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payment was made by a Non-Defaulting Financial Institution until the date such
Non-Defaulting Financial Institution has been paid such amounts in full, at a
rate per annum equal to the Federal Funds Effective Rate plus two percent
(2.0%). In addition, without prejudice to any other rights that Conduit may have
under applicable law, each Defaulting Financial Institution shall pay to Conduit
forthwith upon demand, the difference between such Defaulting Financial
Institution's unpaid Acquisition Amount and the amount paid with respect thereto
by the Non-Defaulting Financial Institutions, together with interest thereon,
for each day from the date of the Agent's request for such Defaulting Financial
Institution's Acquisition Amount pursuant to Section 14.1 until the date the
requisite amount is paid to Conduit in full, at a rate per annum equal to the
Federal Funds Effective Rate plus two percent (2.0%).
ARTICLE XV
THE CUSTODIAN
Section 15.1 Appointment of Custodian; Delivery of Records; Verification.
Appointment of Custodian; Delivery of Receivable Documents; Verification
(a) The Seller hereby initially appoints Sage Systems, Inc., in its
independent corporate capacity, as the Custodian, to act as custodian and bailee
with respect to the Receivable Documents that are related to the 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
Seller, the Servicer, the Agent and the Purchasers. With respect to such
Receivable Documents, the Custodian agrees to act in accordance with this
Agreement and in accordance with any directions of the Seller, Servicer or
Agent. Under no circumstances shall the Custodian (i) deliver possession of any
Receivable Documents to the Servicer or any other Person, or (ii) take any
directions with respect to any Receivable Documents from the Seller, the
Servicer or any other Person, without the express written consent of the Agent.
(b) On a date at least five Business Days prior to a proposed RSA Purchase
Date, the Originator shall deliver or cause to be delivered (a) to the
Custodian, Seller and the Agent a Draft Schedule of Receivables pursuant to the
Sale Agreement, which shall list the Receivables the Originator proposes to
transfer to Seller, and (b) to the Custodian, each Receivable Document listed in
the definition of "Receivable Documents."
(c) Upon receipt of the documents described in Section 15.1(b), the
Custodian shall verify that (i) all documents required to be delivered to it
pursuant to this Agreement are in the Custodian's possession, and that (ii) such
documents appear regular on their face and relate to the appropriate Receivable
and none of the Receivable Documents contain evidence of any claims, liens,
security interests or encumbrances (other than the Lien of this Agreement).
(d) Not less than two Business Days prior to the proposed RSA Purchase
Date, the Custodian shall deliver to the Originator, the Seller and the Agent
(in both hard copy and electronic format acceptable to the Agent) a confirmation
and Schedule (the "Schedule of Exceptions") on which the Custodian shall both
confirm that it has performed the verification described in Section 15.1(c) and
note any discrepancy or deficiency which exists with respect to any Receivable
Document. 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
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hereunder are in the possession of the Custodian. No Receivable which is listed
on a Schedule of Exceptions shall constitute an Eligible Receivable unless the
Agent, in its sole discretion, has consented in writing to the treatment of such
Receivable as an Eligible Receivable.
(e) Not more than five Business Days following each RSA Purchase Date, the
Custodian shall ensure that All Receivable Documents related to Receivables
conveyed to Seller on an RSA Purchase Date will be marked and placed in files
which pertain only to Receivables conveyed to Seller, which files are physically
separated from the files relating to other receivables which the Custodian holds
on behalf of itself or others, including other TWRI Receivables.
Section 15.2 Receipts.
On the Business Day immediately preceding an RSA Purchase Date, the
Custodian shall deliver (in both hard copy and electronic format acceptable to
the Agent) (i) an original certification and receipt in the form attached hereto
as Exhibit XI (a "Receipt") to the Originator, and (ii) copies of the Receipt to
the Seller and Agent. Each Receipt shall include a list of all Receivables,
including such newly sold Receivables, for which the Custodian is holding
Receivable Documents.
Section 15.3 Duties of Custodian.
(a) Covenant of Custodian. Until this Agreement has terminated, the
Custodian shall maintain the Master Schedule of Receivables at its office set
forth on the signature page hereof for inspection during normal business hours
by interested parties.
(b) 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.
(c) 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. The Custodian will notify Agent
of any change of address no less than 90 days in advance of any relocation of
these facilities. The Custodian shall provide access to the facilities to the
Seller and the Agent or their related representatives at such time as the each
may reasonably request.
(d) Reviews. The Custodian shall conduct, or cause to be conducted,
periodic reviews of all items held by it under this Agreement in such a manner
as shall enable the Seller and the Agent to verify the accuracy of the
Custodian's record keeping. The Custodian shall immediately report to the Seller
and the Agent any defect with respect to a Receivable Document or any failure on
its part to hold the Receivable Documents as herein provided.
(e) Release of Documents. Upon receipt of a Request for Release as provided
in Section 2.10 of this Agreement, 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 2.10
shall be free of the interests of the Agent for the benefit of the Purchasers
under this Agreement. Upon notice of a the declaration of the Amortization Date,
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and if TWRI or any of its Subsidiaries or Affiliates is no longer acting as
Servicer, the Custodian shall cooperate to effect the transfer of the Records 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 Agreement, 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 custodians in similar
transactions. A certificate of the respective insurer as to each such policy
shall be furnished to the Agent, upon request, stating that such policy is in
full force and effect.
(g) Updated Receipt and Receivable Data. On each Determination Date and
within two Business Days of a request from the Agent, the Custodian shall
provide (i) an updated Receipt (in both hard copy and electronic format
acceptable to the Agent) to the Agent, as to the Receivable Documents in its
possession and (ii) such electronic data regarding the Receivables as is
reasonably requested by the Agent in a format acceptable to the Agent. (h)
Copies of Receivable Documents. Upon request from the Agent, the Custodian
shall, at the expense of the Servicer, provide copies of Receivable Documents to
the Agent.
(i) Annual Reports. Custodian will maintain for itself a system of
accounting established and administered in accordance with GAAP and furnish to
the Agent, within 90 days after the close of each of its fiscal years,
unaudited, unqualified financial statements (which may be internally prepared
and shall include balance sheets and statements of income) certified by an
Authorized Officer.
Section 15.4 Representations and Warranties of Custodian.
The Custodian, in its individual corporate capacity, represents and
warrants to the Agent and the Purchasers 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 Seller;
(c) In respect of other creditors, lenders or other financial
intermediaries of Originator or any Affiliate of Originator for which 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.
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Section 15.5 Indemnification of Custodian.
The Custodian in its individual corporate capacity, hereby agrees to
indemnify and hold the Servicer, the Seller, WorldMark (subject to the
provisions of any separate agreement between the Custodian and WorldMark), the
Agent, the Purchasers, 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
(i) the Custodian's negligence, willful misconduct or failure to
perform its obligations hereunder,
(ii) a breach of any representation or warranty by the Custodian
contained in this Agreement, or
(iii) failure to comply with any applicable law, Rule or
regulation with respect to any Receivable or Contract related thereto.
The foregoing indemnification provisions set forth shall survive any termination
of this Agreement.
Section 15.6 Adverse Interests.
By execution of this Agreement, the Custodian represents, warrants and
covenants that it does not currently hold, and during the existence of this
Agreement shall not hold, any adverse interest, by way of security or otherwise,
in any Receivable, and hereby waives and releases any such interest that it may
have in any Receivable as of the date hereof. Notwithstanding any other
provisions of this Agreement 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
Record, Receivable or proceeds of either.
Section 15.7 Termination of Custodian.
(a) The Agent may, without cause, request that the Custodian be replaced
with a successor custodian. Upon receipt of written directions from the
Purchasers that the Purchasers desire to remove the Custodian, the Agent shall
promptly notify the Custodian that all its rights and obligations under this
Agreement are terminated and the Seller, with the consent of the Required
Financial Institutions, shall 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 Seller and the
Custodian shall assist the successor custodian to assume and perform the duties
of the Custodian hereunder (including the immediate delivery of all Receivable
Documents to the successor custodian).
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ARTICLE XVI
MISCELLANEOUS
Section 16.1 Waivers and Amendments.
(a) No failure or delay on the part of the Agent or any Purchaser in
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other further exercise thereof or the exercise of
any other power, right or remedy. The rights and remedies herein provided shall
be cumulative and nonexclusive of any rights or remedies provided by law. Any
waiver of this Agreement shall be effective only in the specific instance and
for the specific purpose for which given.
(b) No provision of this Agreement may be amended, supplemented, modified
or waived except in writing in accordance with the provisions of this Section
16.1(b). The Conduit, the Servicer, the Seller and the Agent, at the direction
of the Required Financial Institutions, may enter into written modifications or
waivers of any provisions of this Agreement, provided, however, that no such
modification or waiver shall:
(i) without the consent of each affected Purchaser, (a) extend
the Liquidity Termination Date or the date of any payment or deposit
of Collections by Seller or the Servicer, (b) reduce the rate or
extend the time of payment of Yield (or any component thereof), (c)
reduce any fee payable to the Agent for the benefit of the Purchasers,
(d) except pursuant to Article XIII hereof, change the amount of the
Capital of any ------------ Purchaser, any Financial Institution's Pro
Rata Share (except pursuant to Sections 14.1 or 14.5) or any
------------- ---- Financial Institution's Commitment, (e) amend,
modify or waive any provision of the definition of Required Financial
Institutions or this Section 16.1(b), (F) consent to or permit the
assignment or --------------- transfer by Seller of any of its rights
and obligations under this Agreement, (G) change the definition of
"Eligible Receivable", "Aggregate Reserves" or "Reserve Fund Required
Amount"or (H) amend or modify ------------------- ------------------
---------------------------- any defined term (or any defined term
used directly or indirectly in such defined term) used in clauses (a)
through (G) above in a manner that would circumvent the intention of
the restrictions set forth in such clauses; or
(ii) without the written consent of the then Agent, amend, modify
or waive any provision of this Agreement if the effect thereof is to
affect the rights or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent of the Financial
Institutions, the Agent may, with the consent of Seller and the Servicer, amend
this Agreement solely to add additional Persons as Financial Institutions
hereunder and (ii) the Agent, the Required Financial Institutions and Conduit
may enter into amendments to modify any of the terms or provisions of Article
XII, Article XIII, Section 16.13 or any other provision of this Agreement
without the consent of Seller and the Servicer, provided that such amendment has
no negative impact upon such Person. Any modification or waiver made in
accordance with this Section 16.1 shall apply to each of the Purchasers equally
and shall be binding upon Seller, the Purchasers and the Agent.
Section 16.2 Notices.
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Except as provided below, all communications and notices provided for
hereunder shall be in writing (including bank wire, telecopy or electronic
facsimile transmission or similar writing) and shall be given to the other
parties hereto at their respective addresses or telecopy numbers set forth on
the signature pages hereof or at such other address or telecopy number as such
Person may hereafter specify for the purpose of notice to each of the other
parties hereto. Each such notice or other communication shall be effective (i)
if given by telecopy, upon the receipt thereof, (ii) if given by mail, at the
time such communication is received via first class mail or (iii) if given by
any other means, when received at the address specified in this Section 16.2.
Seller hereby authorizes the Agent to effect purchases and Tranche Period and
Discount Rate selections based on telephonic notices made by any Person whom the
Agent in good faith believes to be acting on behalf of Seller. Seller agrees to
deliver promptly to the Agent a written confirmation of each telephonic notice
signed by an authorized officer of Seller; however, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs from the action taken by the Agent, the records of the
Agent shall govern absent manifest error.
Section 16.3 Ratable Payments.
If any Purchaser, whether by setoff or otherwise, has payment made to it
with respect to any portion of the Aggregate Unpaids owing to such Purchaser
(other than payments received pursuant to Section 11.2 or 11.3) in a greater
proportion than that received by any other Purchaser entitled to receive a
ratable share of such Aggregate Unpaids, such Purchaser agrees, promptly upon
demand, to purchase for cash without recourse or warranty a portion of such
Aggregate Unpaids held by the other Purchasers so that after such purchase each
Purchaser will hold its ratable proportion of such Aggregate Unpaids; provided
that if all or any portion of such excess amount is thereafter recovered from
such Purchaser, such purchase shall be rescinded and the purchase price restored
to the extent of such recovery, but without interest.
Section 16.4 Protection of Ownership Interests of the Purchasers.
(a) Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may be necessary or desirable, or that the Agent may reasonably request, to
perfect, protect or more fully evidence the Purchaser Interests, or to enable
the Agent or the Purchasers to exercise and enforce their rights and remedies
hereunder. At any time after the occurrence or during the continuation of an
Amortization Event, the Agent may, or the Agent may direct Seller, Servicer or
the Custodian to, notify the Obligors of Receivables, at Seller's expense, that
the Agent is acting on behalf of the ownership interests of the Purchasers under
this Agreement and may also direct that payments of all amounts due or that
become due under any or all Receivables be made directly to the Agent or its
designee. Seller or the Servicer (as applicable) shall, at any Purchaser's
request, withhold the identity of such Purchaser (but not of the Agent) in any
such notification.
(b) If any Originating Party fails to perform any of its obligations
hereunder, the Agent or any Purchaser may (but shall not be required to)
perform, or cause performance of, such obligation, and the Agent's or such
Purchaser's costs and expenses incurred in connection therewith shall be payable
by Seller as provided in Section 11.3. Each Originating Party irrevocably
authorizes the Agent at any time and from time to time in the sole discretion of
the Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of
such Originating Party (i) to execute on behalf of Seller as debtor and to file
financing statements necessary or desirable in the Agent's sole discretion to
perfect and to maintain the perfection and priority of the interest of the
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Purchasers in the Receivables and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Receivables as a financing statement in such offices as the Agent in its sole
discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the interests of the Purchasers in the Receivables.
This appointment is coupled with an interest and is irrevocable.
(c) If, at any time following an Amortization Event, in connection with the
sale, liquidation or disposition by the Agent, any Purchaser or any Servicer of
any Receivables, Vacation Credits or other Related Security, it is necessary to
obtain any license or to register or qualify any such Person or any such
collateral under any applicable law or regulation, each Originating Party shall,
at the expense of such Originating Party, take all actions that may be necessary
or desirable, or that the Agent may reasonably request, to assist in any such
licensing, registration or qualification, and the Originating Parties shall
reimburse the Agent, each Purchaser and any such Servicer (other than Trendwest
or any Affiliate thereof) for any fees, costs or expenses incurred thereby.
Section 16.5 Confidentiality.
(a) Each Originating Party and each Purchaser shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of this
Agreement and the other confidential proprietary information with respect to the
Agent and Conduit and their respective businesses obtained by it or them in
connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that such Originating Party and such Purchaser and
its officers and employees may disclose such information to such Originating
Party's and such Purchaser's external accountants and attorneys and as required
by any applicable law or order of any judicial or administrative proceeding.
(b) Anything herein to the contrary notwithstanding, each Originating Party
hereby consents to the disclosure of any nonpublic information with respect to
it (i) to the Agent, the Financial Institutions or Conduit by each other, (ii)
by the Agent or the Purchasers to any prospective or actual assignee or
participant of any of them or (iii) by the Agent to any rating agency,
Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to Conduit or any entity organized for the purpose of purchasing, or
making loans secured by, financial assets for which Bank One acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing. In addition, the Purchasers
and the Agent may disclose any such nonpublic information pursuant to any law,
rule, regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).
Section 16.6 Bankruptcy Petition.
Seller, the Servicer, the Agent and each Financial Institution hereby
covenants and agrees that, prior to the date that is one year and one day after
the payment in full of all outstanding senior Indebtedness of Conduit, it will
not institute against, or join any other Person in instituting against, Conduit
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws of the United States or
any state of the United States.
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Section 16.7 Limitation of Liability.
Except with respect to any claim arising out of the willful misconduct or
gross negligence of Conduit, the Agent or any Financial Institution, no claim
may be made by any Originating Party or any other Person against Conduit, the
Agent or any Financial Institution or their respective Affiliates, directors,
officers, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection therewith; and each Originating Party hereby waives, releases, and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
Section 16.8 CHOICE OF LAW.
THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS.
Section 16.9 CONSENT TO JURISDICTION.
EACH ORIGINATING PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND
EACH OF ORIGINATING PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR
ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY ORIGINATING PARTY IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY ORIGINATING PARTY
AGAINST THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE AGENT OR A PURCHASER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH
ORIGINATING PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS.
Section 16.10 WAIVER OF JURY TRIAL.
EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT, ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT
OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 16.11 Integration; Binding Effect; Survival of Terms.
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(a) This Agreement, each Collection Account Agreement and the Fee Letter
contain the final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof superseding all prior oral or written understandings.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns (including
any Paying Agent in bankruptcy). 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 terminated in accordance with its
terms; provided, however, that the rights and remedies with respect to (i) any
breach of any representation and warranty made by any Originating Party pursuant
to Article V, (ii) the indemnification and payment provisions of Article XI, and
Sections 15.5, 16.3 and 16.4 shall be continuing and shall survive any
termination of this Agreement.
Section 16.12 Counterparts; Severability; Section References.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same Agreement. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Unless otherwise
expressly indicated, all references herein to "Article," "Section," "Schedule"
or "Exhibit" shall mean articles and sections of, and schedules and exhibits to,
this Agreement.
Section 16.13 Bank One Roles.
Each of the Financial Institutions acknowledges that Bank One acts, or may
in the future act, (i) as administrative agent for Conduit, (ii) as issuing and
paying agent for the Commercial Paper, (iii) as Paying Agent, (iv) to provide
credit or liquidity enhancement for the timely payment for the Commercial Paper
and (v) to provide other services from time to time for Conduit (collectively,
the "Bank One Roles"). Without limiting the generality of this Section 16.13,
each Financial Institution hereby acknowledges and consents to any and all Bank
One Roles and agrees that in connection with any Bank One Role, Bank One may
take, or refrain from taking, any action that it, in its discretion, deems
appropriate, including in its role as administrative agent for Conduit, and the
giving of notice to the Agent of a mandatory purchase pursuant to Section 14.1.
Section 16.14 Characterization.
(a) It is the intention of the parties hereto that each purchase hereunder
shall constitute and be treated as an absolute and irrevocable sale, which
purchase shall provide the applicable Purchaser with the full benefits of
ownership of the applicable Purchaser Interest. Except as specifically provided
in this Agreement, each sale of a Purchaser Interest hereunder is made without
recourse to Seller; provided, however, that (i) Seller shall be liable to each
Purchaser and the Agent for all representations, warranties and covenants made
by Seller pursuant to the terms of this Agreement, and (ii) such sale does not
constitute and is not intended to result in an assumption by any Purchaser or
the Agent or any assignee thereof of any obligation of Seller or the Originator
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or any other person arising in connection with the Receivables, the Related
Security, or the related Contracts, or any other obligations of Seller or the
Originator.
(b) If the conveyance by Seller to the Agent for the benefit of the
Purchasers of interests in Receivables hereunder shall be characterized as a
secured loan and not a sale, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law. In
furtherance of the foregoing, Seller hereby grants to the Agent for the ratable
benefit of the Purchasers a valid and perfected security interest in all of
Seller's right, title and interest in, to and under the Receivables, the
Collections, each Collection Account, all Related Security, all other rights and
payments relating to the Receivables, and all proceeds of any thereof prior to
all other liens on and security interests therein to secure the prompt and
complete payment of the Aggregate Unpaids. After an Amortization Event, the
Agent and the Purchasers shall have, in addition to the rights and remedies that
they may have under this Agreement, all other rights and remedies provided to a
secured creditor after default under the UCC and other applicable law, which
rights and remedies shall be cumulative.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
TW HOLDINGS III, INC.
By:__________________________________
Name:
Title:
Address: 9805 Willows Road
Redmond, WA 98052
TRENDWEST RESORTS INC.
By:__________________________________
Name:
Title:
Address: 9805 Willows Road
Redmond, WA 98052
SAGE SYSTEMS, INC.
By:__________________________________
Name:
Title:
Address:
INTERNATIONAL SECURITIZATION CORPORATION
By:__________________________________
Authorized Signatory
Address: c/o Bank One, NA
(Main Office Chicago), as Agent
Asset Backed Finance
Suite 0079, 1-19
1 Bank One Plaza
Chicago, Illinois 60670-0019
Fax: (312) 732-1844
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Bank One, NA, as a Financial Institution and
as Agent
By:__________________________________
Name:
Title:
Address: Bank One, NA (Main Office Chicago)
Asset Backed Finance
Suite 0596, 1-21
1 Bank One Plaza
Chicago, Illinois 60670-0596
Fax: (312) 732-4487
Bank One, NA, as Paying Agent
By:__________________________________
Name:
Title:
Address: Bank One, NA
ATTN: Darlington Cummings
235 West Schrock Road
Westerville, OH 43081
Fax: (602) 221-1711
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EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Accrual Period" means each calendar month, provided that the initial
Accrual Period hereunder means the period from (and including) the date of the
initial purchase hereunder to (and including) the last day of the calendar month
thereafter.
"Accrued Balance" means, with respect to a Receivable as of any date of
determination, the Outstanding Balance of such Receivable plus the amount of any
accrued and unpaid interest on such Receivable on such date.
"Acquisition Amount" means, on the date of any purchase from Conduit of
Purchaser Interests pursuant to Section 14.1, with respect to each Financial
Institution, the lesser of (a) such Financial Institution's Pro Rata Share of
the Conduit Transfer Price and (b) such Financial Institution's unused
Commitment.
"Adjusted Liquidity Price" means, in determining the Conduit Transfer Price
for any Purchaser Interest, an amount equal to
PI[(i)DC+(ii)DA+(iii)[ NDR ]
-----------
1+(.50x.10)
where:
PI = the undivided percentage interest evidenced by such Purchaser
Interest.
DC = the Deemed Collections.
DA = the aggregate amount of funds in the Designated Accounts.
NDR = the Outstanding Balance of all Receivables as to which any
payment, or part thereof, has not remained unpaid for 179 days
or more from the original due date for such payment.
Each of the foregoing shall be determined from the most recent Monthly Report
received from the Servicer.
"Adverse Claim" means a lien, security interest, charge or encumbrance, or
other right or claim in, of or on any Person's assets or properties in favor of
any other Person.
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"Affected Financial Institution" has the meaning specified in Section
13.1(c).
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person or any Subsidiary of such Person. A Person shall be
deemed to control another Person if the controlling Person owns 10.0% or more of
any class of voting securities of the controlled Person or possesses, directly
or indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Aged Receivable" means, at the end of any Accrual Period, an Eligible
Receivable which was assigned from Originator to Seller pursuant to the Sale
Agreement on an RSA Purchase Date which occurred 24 months or more prior to the
end of such Accrual Period. In the case of an Upgrade Receivable, such 24 months
shall be measured from the RSA Purchase Date upon which the related Pre-Upgrade
Receivable was assigned from Originator to Seller.
"Agent" has the meaning set forth in the preamble to this Agreement.
"Aggregate Reserves" means, on any date, an amount equal to 10% of the Net
Receivables Balance as of the close of business of the Servicer on such date.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of all
accrued and unpaid fees under the Fee Letter, CP Costs, Yield, Capital and all
other unpaid Obligations (whether due or accrued) at such time.
"Agreement" means this Receivables Purchase Agreement, as it may be amended
or modified and in effect from time to time.
"Amortization Date" means the earlier to occur of (i) the Business Day
specified in a written notice from the Agent following the occurrence of any
Amortization Event, and (ii) the date which is 30 Business Days after the
Agent's receipt of written notice from Seller that it wishes to terminate the
facility evidenced by this Agreement.
"Amortization Event" has the meaning specified in Section 10.1.
"Amortization Period Available Funds" shall mean, on any Settlement Date on
or following the Amortization Date, the aggregate of (i) the Monthly Available
Funds for such Settlement Date, (ii) all amounts on deposit in the Reserve
Account and (iii) if so determined by the Agent pursuant to Section 9.1(c), all
amounts then on deposit in the Hedge Account.
"Assignment Agreement" has the meaning set forth in Section 13.1(b).
"Authorized Officer" shall mean, with respect to any Originating Party, its
respective corporate controller, chief financial officer or any other designated
officer acceptable to the Agent.
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"Automatic Debit Collection" means the payment under a Contract by an
Obligor by means of automatic electronic funds transfer from the Obligor's bank
account to the Clearing Account.
"Bank One" means Bank One, NA (with its main office in Chicago, Illinois),
in its individual capacity, and its successors.
"Big 5 Accounting Firm" means any of the independent public accounting
firms of Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick,
PriceWaterhouseCoopers, or their successors.
"Broken Funding Costs" means for any Purchaser Interest which (x) (i) has
its Capital reduced or terminated without compliance with the notice
requirements hereunder or (ii) is assigned under Article XIII or terminated
prior to the date it was originally scheduled, the excess, if any, of (a) the CP
Costs or Yield (as applicable) that would have accrued during the remainder of
the tranche periods for Commercial Paper determined by the Agent to relate to
such Purchaser Interest subsequent to the date of such reduction or termination
on the Capital of such Purchaser Interest if such reduction or termination had
not occurred, over (b) the sum of (x) to the extent all or a portion of such
Capital is allocated to another Purchaser Interest, actually accrued during such
periods on such Capital for the new Purchaser Interest, and (y) to the extent
such Capital is not allocated to another Purchaser Interest, the income, if any,
actually received during such period by the holder of such Purchaser Interest
from investing the portion of such Capital not so allocated; or (y) does not
become subject to reduction following the delivery of a Monthly Report
describing a reduction (as provided in Section 1.3), the amount of CP Costs or
Yield, swap costs or other interest or hedging expense that accrues for
Commercial Paper or other funding sources determined by the Agent to relate to
such Purchaser Interest subsequent to the date such reduction was designated to
occur pursuant to such Monthly Report on the Capital of such Receivable
Interest. In the event that the amount referred to in clause (b) exceeds the
amount referred to in clause (A), the relevant Purchaser or Purchasers agree to
pay to the Seller the amount of such excess. All Broken Funding Costs shall be
due and payable hereunder upon demand. "Business Day" means any day on which
banks are not authorized or required to close in New York, New York or Chicago,
Illinois and The Depository Trust Company of New York is open for business, and,
if the applicable Business Day relates to any computation or payment to be made
with respect to the LIBO Rate, any day on which dealings in dollar deposits are
carried on in the London interbank market.
"Capital" of any Purchaser Interest means, at any time, (a) the Purchase
Price of such Purchaser Interest, minus (b) the sum of the aggregate amount of
Collections and other payments received by the Agent which in each case are
applied to reduce such Capital in accordance with the terms and conditions of
this Agreement; provided that such Capital shall be restored (in accordance with
Section 2.5) in the amount of any Collections or other payments so received and
applied if at any time the distribution of such Collections or payments are
rescinded, returned or refunded for any reason.
"Capitalization Ratio" means the ratio of (a) Consolidated Indebtedness to
(b) Consolidated Net Worth.
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"Carrying and Servicing Costs" means, for any Accrual Period, the sum of
(i) all CP Costs for such Accrual Period, (ii) all Yield allocable to such
Accrual Period, (iii) all fees set forth in the Fee Letter which are allocable
to such Accrual Period and (iv) the servicing fees and expenses payable to the
Servicer for such Accrual Period pursuant to Section 8.6 of this Agreement or
otherwise, in each case as determined by the Agent and reported pursuant to
Section 3.3 of this Agreement.
"Change of Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of any
Originating Party.
"Charge-Off Factor" means, with respect to any Accrual Period, a fraction
of which the numerator is 365 and the denominator is the number of days in such
Accrual Period.
"Charge-Off Ratio" means, with respect to any Accrual 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 Accrual Period, and (y) the
Outstanding Balance of all Receivables that became Charged-Off Receivables
during such Accrual Period (but excluding the Outstanding Balance of all
Charged-off Receivables that were repurchased by Originator pursuant to Section
1.5 on the Settlement Date related to such Accrual Period) and the denominator
of which is the average Outstanding Balance of all Receivables for such Accrual
Period (but excluding any such repurchased Receivables).
"Charged-Off Receivable" means a Receivable: (i) as to which the Obligor
thereof has taken any action, or suffered any event to occur, of the type
described in Section 10.1(d) (as if references to Originating Party therein
refer to such Obligor; (ii) as to which the Obligor thereof, if a natural
person, is deceased; (iii) which, consistent with the Credit and Collection
Policy, would be written off TWRI's books as uncollectible; (iv) which has been
identified by Seller as uncollectible; or (v) as to which any payment, or part
thereof, remains unpaid for 179 days or more from the original due date for such
payment.
"Charged-Off TWRI Receivable" means a TWRI Receivable: (i) as to which the
Obligor thereof has taken any action, or suffered any event to occur, to that of
the type described in Section 10.1(d) or a similar event (as if references to
Originating Party therein refer to such bObligor); (ii) as to which the Obligor
thereof, if a natural person, is deceased, (iii) which, consistent with the
Credit and Collection Policy, would be written off TWRI's books as
uncollectible, (iv) which has been identified by Seller as uncollectible or (v)
as to which any payment, or part thereof, remains unpaid for 179 days or more
from the original due date for such payment.
"Clearing Account" has the meaning set forth in Section 8.2(b).
"Collection Account" has the meaning set forth in Section 2.9(a).
"Collections" means, with respect to any Receivable, all cash collections
and other cash proceeds in respect of such Receivable, including all yield,
finance charges or other related amounts accruing in respect thereof, all
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proceeds of repurchases pursuant to Section 1.5 of this Agreement, all payments
made by or on behalf of Seller in respect of Deemed Collections and all cash
proceeds of Related Security with respect to such Receivable.
"Commercial Paper" means promissory notes of Conduit issued by Conduit in
the commercial paper market.
"Commitment" means, for each Financial Institution, the commitment of such
Financial Institution to purchase its Pro Rata Share of Purchaser Interests from
(i) Seller and (ii) Conduit, such Pro Rata Share not to exceed, in the
aggregate, the amount set forth opposite such Financial Institution's name on
Schedule A to this Agreement, as such amount may be modified in accordance with
the terms hereof.
"Conduit" has the meaning set forth in the preamble to this Agreement.
"Conduit Residual" means the sum of the Conduit Transfer Price Reductions.
"Conduit Transfer Price" means, with respect to the assignment by Conduit
of one or more Purchaser Interests to the Agent for the benefit of the Financial
Institutions pursuant to Section 13.1, the sum of (i) the lesser of (a) the
Capital of each Purchaser Interest and (b) the Adjusted Liquidity Price of each
Purchaser Interest and (ii) all accrued and unpaid CP Costs for such Purchaser
Interest.
"Conduit Transfer Price Reduction" means in connection with the assignment
of a Purchaser Interest by Conduit to the Agent for the benefit of the Financial
Institutions, the positive difference between (i) the Capital of such Purchaser
Interest and (ii) the Adjusted Liquidity Price for such Purchaser Interest.
"Consolidated Charge-Off Ratio" means, for any Accrual 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 Accrual Period, and (y) the
Outstanding Balance of all TWRI Receivables that became Charged-Off Receivables
during such Accrual Period and the denominator of which is the average
Outstanding Balance of all TWRI Receivables for each day in such Accrual Period.
"Consolidated Default Ratio" means, at any time, a percentage equal to (i)
the aggregate Outstanding Balance of all TWRI Receivables that were Defaulted
TWRI Receivables at such time divided by (ii) the aggregate Outstanding Balance
of all TWRI Receivables at such time.
"Consolidated Delinquency Ratio" means, at any time, a percentage equal to
(i) the aggregate Outstanding Balance of all TWRI Receivables that were
Delinquent TWRI Receivables at such time divided by (ii) the aggregate
Outstanding Balance of all TWRI Receivables at such time.
"Consolidated Indebtedness" means the consolidated Indebtedness of the TWRI
and its consolidated Subsidiaries.
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"Consolidated Net Worth" means the consolidated shareholders' equity of
TWRI and its consolidated Subsidiaries.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including any comfort letter, operating agreement, take-or-pay
contract or application for a letter of credit.
"Contract" means a Vacation Owner Agreement and any and all other
instruments, agreements, invoices, or other writings pursuant to which
Indebtedness of an Obligor to Originator arises or which evidences such
Indebtedness.
"CP Costs" means, for each day, the sum of (i) discount accrued on Pooled
Commercial Paper on such day, plus (ii) any and all accrued commissions in
respect of placement agents and Commercial Paper dealers, and issuing and paying
agent fees incurred, in respect of such Pooled Commercial Paper for such day,
plus (iii) other costs associated with funding small or odd-lot amounts with
respect to all receivable purchase facilities which are funded by Pooled
Commercial Paper for such day, minus (iv) any accrual of income net of expenses
received on such day from investment of collections received under all
receivable purchase facilities funded substantially with Pooled Commercial
Paper, minus (v) any payment received on such day net of expenses in respect of
Broken Funding Costs related to the prepayment of any Receivables Interest of
Conduit pursuant to the terms of any receivable purchase facilities funded
substantially with Pooled Commercial Paper, plus (vi) upon the occurrence and
during the continuation of an Amortization Event or an Excess Aged Receivables
Event, an amount equal to the daily equivalent of 2.0% per annum of total
outstanding Capital. In addition to the foregoing costs, if Seller shall request
any Incremental Purchase during any period of time determined by the Agent in
its sole discretion to result in incrementally higher CP Costs applicable to
such Incremental Purchase, the Capital associated with any such Incremental
Purchase shall, during such period, be deemed to be funded by Conduit in a
special pool (which may include capital associated with other receivable
purchase facilities) for purposes of determining such additional CP Costs
applicable only to such special pool and charged each day during such period
against such Capital.
"Credit Agreement" means that certain Credit Agreement dated as of February
12, 1998, among TWRI, Bank of America National Trust and Savings Association and
other financial institutions party thereto, as it may be amended from time to
time and any replacements thereof.
"Credit and Collection Policy" means Seller's credit and collection
policies and practices relating to Contracts and Receivables existing on the
date hereof and summarized in Exhibit VIII hereto, as modified from time to time
in accordance with this Agreement.
"Custodian" means at any time the Person then authorized pursuant to
Article XV to act as custodian and bailee with respect to the Receivable
Documents.
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"Deemed Collections" means the aggregate of all amounts Seller shall have
been deemed to have received as a Collection of a Receivable. Unless a
Receivable has been repurchased pursuant to Section 1.5 or such Receivable has
been the subject of an Upgrade which complies with Section 1.6 of this
Agreement, Seller shall be deemed to have received a Collection in full of a
Receivable if at any time (i) the Outstanding Balance of any such Receivable is
either (x) reduced as a result of any defective or rejected goods or services
(including an Obligor's inability to exercise the Obligor's rights to use
Resorts and Units), any discount or any adjustment or otherwise by Seller (other
than cash Collections on account of the Receivables) or (y) reduced or canceled
as a result of a setoff in respect of any claim by any Person (whether such
claim arises out of the same or a related transaction or an unrelated
transaction) or (ii) any of the representations or warranties in Article V are
no longer true with respect to any Receivable.
"Default Fee" means with respect to any amount due and payable by Seller in
respect of any Aggregate Unpaids, an amount equal to the greater of (i) $1000
and (ii) interest on any such unpaid Aggregate Unpaids at a rate per annum equal
to 2.0% above the Prime Rate.
"Defaulted Receivable" means a Receivable on which payment of all or part
of the amount due remains unpaid for more than 90 and less than 179 days but
which is not a Charged-Off Receivable.
"Defaulted TWRI Receivable" means a TWRI Receivable on which payment of all
or part of the amount due remains unpaid for more than 90 and less than 179 days
but which is not a Charged-Off TWRI Receivable.
"Default Ratio" means, at any time, a percentage equal to (i) the aggregate
Outstanding Balance of all Receivables that were Defaulted Receivables at such
time divided by (ii) the aggregate Outstanding Balance of all Receivables at
such time.
"Delinquency Ratio" means, at any time, a percentage equal to (i) the
aggregate Outstanding Balance of all Receivables that were Delinquent
Receivables at such time divided by (ii) the aggregate Outstanding Balance of
all Receivables at such time.
"Delinquent Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for 31 or more days or more from the original due date
for such payment but which is not a Charged-Off Receivable.
"Delinquent TWRI Receivable" means a TWRI Receivable as to which any
payment, or part thereof, remains unpaid for 31 or more days or more from the
original due date for such payment but which is not a Charged-Off TWRI
Receivable.
"Designated Accounts" shall have the meaning set forth in Section 2.8 of
this Agreement.
"Determination Date" means, with respect to an Accrual Period, the 10th day
of the month following such Accrual Period, or if such day is not a Business Day
then the next succeeding Business Day.
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"Diluted Receivable" shall mean any Receivable in respect of which one or
more of the events specified in clause (i) or clause (ii) of the definition of
"Deemed Collections" shall have occurred.
"Discount Rate" means the LIBO Rate or the Prime Rate, as applicable, with
respect to each Purchaser Interest of the Financial Institutions, except that
upon the occurrence and during the continuation of an Amortization Event or an
Excess Aged Receivables Event, Discount Rate shall mean the Prime Rate plus
2.0%.
"Draft Schedule of Receivables" has the meaning set forth in Section 1.1 of
the Sale Agreement.
"Eligible Investment" shall mean, at any time, any one or more of the
following types of investments, each of which shall mature on or prior to the
next succeeding Settlement Date:
(i) direct marketable obligations of the United States having a maturity of
not more than 30 days from the date of acquisition;
(ii) marketable obligations directly and fully guaranteed by the United
States as to the full and timely payment of principal and interest having a
maturity of not more than 30 days from the date of acquisition;
(iii) bankers' acceptances and certificates of deposit denominated in U.S.
Dollars in each case having a maturity of not more than 30 days from the date of
acquisition, and issued by any bank with capital, surplus and undivided profits
aggregating at least $100,000,000, the short-term unsecured securities of which
are rated at least A-1 by S&P and P-1 by Moody's;
(iv) commercial paper having a maturity of not more than 30 days and which
is rated at least A-1 by S&P and P-1 by Moody's;
(v) freely redeemable shares in no-load money market funds which invest
solely in obligations, bankers' acceptances, certificates of deposit and
commercial paper of the types described in clauses (i) through (iv), without
regard to the limitations as to the maturity of such obligations, bankers'
acceptances, certificates of deposit or commercial paper set forth in such
clauses, rated at least AAAm by S&P and Aaa by Moody's; and
(vi) any money market fund so long as it shall be rated by each of S&P and
Moody's as either AAAm, Aaa, as an eligible investment for AAA/Aaa rate
transactions, or in the highest short-term rating assigned by S&P or Moody's.
"Eligible Receivable" means, at any time, an Originated Receivable:
(i) the Obligor of which (a) if a natural person, is a resident of the
United States or any Canadian province other than Quebec, (b) if a corporation
or other business organization, is organized under the laws of the United States
or any Canadian province other than Quebec or any political subdivision thereof
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and has its chief executive office in the United States or any Canadian province
other than Quebec; (c) is not an Affiliate of any of the parties hereto; and (d)
is not a government or a governmental subdivision or agency,
(ii) the Obligor of which is not the Obligor of any Delinquent Receivable,
Defaulted Receivable or Charged-Off Receivable,
(iii) which is not more than 30 days past due and which has never been more
than 30 days past due,
(iv) each payment (notwithstanding any payments made by the Obligor at the
time of entering into a Contract) under which by its terms is due and payable
within no more than 45 days of the original billing date therefor,
(v) which has not had its payment terms extended (other than in the case of
an Upgrade Contract),
(vi) the remaining term of which is not greater than 84 months,
(vii) on which the Obligor has made at least one payment (other than in the
case of an Upgrade Contract),
(viii) which is an "account," "chattel paper" or "general intangible"
within the meaning of Section 9-105 or Section 9-106, respectively, of the UCC
of all applicable jurisdictions,
(ix) which is denominated and payable only in United States dollars in the
United States,
(x) which arises under a Contract which is in substantially the form of ne
of the form contracts set forth on Exhibit IX hereto or which has been otherwise
approved by the Agent in writing, which, together with such Receivable, is in
full force and effect and constitutes the legal, valid and binding obligation of
the related Obligor enforceable against such Obligor in accordance with its
terms subject to no offset, counterclaim or other defense,
(xi) which arises under a Contract which (a) does not require the Obligor
under such Contract to consent to the transfer, sale or assignment of the rights
and duties of Seller under such Contract and (b) does not contain a
confidentiality provision that purports to restrict the ability of any Purchaser
to exercise its rights under this Agreement, including its right to review the
Contract,
(xii) .which arises under a Contract that contains an obligation to pay a
specified sum of money,
(xiii) which, together with the Contract related thereto, does not
contravene any law, Rule or regulation applicable thereto (including any law,
Rule and regulation relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection practices and
privacy) and with respect to which no part of the Contract related thereto is in
violation of any such law, Rule or regulation,
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(xiv) which satisfies all applicable requirements of the Credit and
Collection Policy,
(xv) which was generated in the ordinary course of Originator's business,
(xvi) which arises solely from the purchase of Vacation Credits by an
Obligor or from an Upgrade by an Obligor,
(xvii) as to which the Agent has not notified Seller that the Agent has
determined that such Receivable or class of Receivables is not acceptable as an
Eligible Receivable, including because such Receivable arises under a Contract
that is not acceptable to the Agent,
(xviii) as to which, if such Receivable has been listed on a Schedule of
Exceptions delivered by the Custodian pursuant to Section 15.1(d) of this
Agreement, the Agent has consented in writing to the treatment of such
Receivable as an Eligible Receivable, and
(xix) the Receivables File for which includes all related Receivable
Documents.
"Environmental Claims" means all claims, however asserted, by any
governmental authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
An "Excess Aged Receivables Event" will occur on any date if (i) the
aggregate outstanding amount of Capital on such date exceeds (ii) the result of
the Fresh Receivables Balance on such date minus the Aggregate Reserves on such
date.
"Excess Concentration Balances" means at any time the amount (if any) by
which the aggregate Outstanding Balance of the Eligible Receivables of all
Obligors which are (i) natural persons resident in Canada or (ii) business
organizations organized under the laws of Canada or any jurisdiction therein or
which have their chief executive office in Canada or any jurisdiction therein
exceeds 10.0% of the aggregate Capital of all Purchaser Interests.
"Facility Account" means Seller's Account No. 125000024-68617018 at Bank of
America, Washington.
"Facility Termination Date" means the earliest of (i) the occurrence of an
Amortization Event, (ii) 30 Business Days after the receipt of written
notification from Seller to the Agent of Seller's intention to terminate the
Liquidity Facility, and (iii) the Liquidity Termination Date.
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"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period equal to (a) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (Chicago time) for such day on such transactions
received by the Reference Bank from three federal funds brokers of recognized
standing selected by it.
"Fee Letter" means that certain letter agreement dated as of the date
hereof among the Seller, the Originator and the Agent, as it may be amended or
modified and in effect from time to time.
"Finance Charge Receivable" means a Receivable in respect of Finance
Charges.
"Finance Charges" means, with respect to a Contract, any finance, interest,
late payment charges or similar charges owing by an Obligor to the Seller
pursuant to such Contract or any service fees owed to the Seller related to such
Contract. Finance Charges do not include WorldMark membership dues owed by
Obligors.
"Financial Institutions" has the meaning set forth in the preamble in this
Agreement.
"Fresh Receivables Balance" means, at any time, (i) the aggregate
Outstanding Balance of all Eligible Receivables at such time reduced by (ii) the
Outstanding Balance of all Aged Receivables at such time.
"Funding Agreement" means this Agreement and any agreement or instrument
executed by any Funding Source with or for the benefit of Conduit.
"Funding Source" means (i) any Financial Institution or (ii) any insurance
company, bank or other funding entity providing liquidity, credit enhancement or
back-up purchase support or facilities to Conduit.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.
"Gross Excess Spread" means, for any Accrual Period, the total Collections
in respect of Finance Charge Receivables for such Accrual Period, minus the
Carrying and Servicing Costs for such Accrual Period.
"Gross Excess Spread Percentage" means, for any Accrual Period, the
percentage equivalent of a fraction, the numerator of which is the product of
twelve and the Gross Excess Spread for such Accrual Period, and the denominator
of which is the average daily Outstanding Balance of all Receivables during such
Accrual Period.
"Hedge Account" shall have the meaning set forth in Section 2.8(c) of this
Agreement.
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"Hedge Accumulation Period" has the meaning set forth in Section 9.2(a).
"Hedge Event" shall have the meaning set forth in Section 9.1 of this
Agreement.
"Hedge Event Cure Date" means the first Settlement Date following the
occurrence of a Hedge Event which is both (x) the third consecutive Settlement
Date on which no Hedge Event has been in existence and (y) a date on which no
Amortization Event or Potential Amortization Event is then in existence.
"Hedge Receipts" shall mean, with respect to any Settlement Date, the
aggregate amount of payments received by the Agent or in the Collection Account
from the counterparty under any Purchased Hedge since the preceding Settlement
Date.
"Hedging Costs" shall mean all costs incurred in the acquisition of a
Purchased Hedge pursuant to Section 9.2 of this Agreement and, if such Purchased
Hedge requires the Seller, the Servicer, the Agent or any Purchaser to make
subsequent periodic or lump sum payments, any such payments.
"Incremental Purchase" means the initial purchase of a Purchaser Interest
and any subsequent purchase of one or more Purchaser Interests which increases
the total outstanding Capital hereunder.
"Indebtedness" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the deferred purchase price of property or
services (other than accounts payable arising in the ordinary course of such
Person's business payable on terms customary in the trade), (iii) obligations,
whether or not assumed, secured by liens or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person, (iv)
obligations which are evidenced by notes, acceptances, or other instruments, (v)
capitalized lease obligations, (vi) net liabilities under interest rate swap,
exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities
in respect of unfunded vested benefits under plans covered by Title IV of ERISA.
"Independent Director" shall mean a member of the Board of Directors of the
Seller who is not at such time, and has not been at any time during the
preceding five (5) years, (a) a director, officer, employee or affiliate of
Seller, the Originator, or any of their respective Subsidiaries or Affiliates,
except as (i) an Independent Officer of the Seller or (ii) an independent
director or independent officer of any "special purpose entity" formed by the
Originator and its Affiliates, or (b) the beneficial owner (at the time of such
individual's appointment as an Independent Director or at any time thereafter
while serving as an Independent Director) of any of the outstanding common
shares of Seller, the Originator, or any of their respective Subsidiaries or
Affiliates, having general voting rights nor is a sibling, parent, child or
spouse of the foregoing.
"Independent Officer" shall mean an executive officer of Seller who is not
at such time, and has not been at any time during the preceding five (5) years,
(a) a director, officer, employee or affiliate of Seller, Originator, or any of
their respective Subsidiaries or Affiliates, except as (i) an Independent
Director of the Seller or (ii) an independent director or independent officer of
any "special purpose entity" formed by the Originator and its Affiliates, or (b)
the beneficial owner (at the time of such individual's appointment as an
Independent Officer or at any time thereafter while serving as an Independent
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Officer) of any of the outstanding common shares of Seller, the Originator, or
any of their respective Subsidiaries or Affiliates, having general voting
rights, nor is a sibling, parent, child or spouse of the foregoing.
"Installment Sale Contract" shall mean a vacation owner agreement executed
by TWRI, WorldMark and an Obligor.
"Interest Coverage Ratio" means, as of the close of each fiscal quarter of
TWRI, the ratio of (a) the consolidated net income of TWRI and its consolidated
Subsidiaries, determined in accordance with GAAP but without deducting expenses
for interest, taxes on income, depreciation, or amortization, for such fiscal
quarter and the preceding three consecutive fiscal quarters of the Servicer to
(b) the consolidated interest expense of TWRI and its consolidated Subsidiaries
for such period.
"LIBO Rate" means the rate per annum equal to the sum of (i) (a) the rate
at which deposits in U.S. Dollars are offered by the Reference Bank (which in no
case shall be Bank One or any of its Subsidiaries or Affiliates) to first-class
banks in the London interbank market at approximately 11:00 a.m. (London time)
two Business Days prior to the first day of the relevant Tranche Period, such
deposits being in the approximate amount of the Capital of the Purchaser
Interest to be funded or maintained, divided by (b) one minus the maximum
aggregate reserve requirement (including all basic, supplemental, marginal or
other reserves) which is imposed against the Reference Bank in respect of
Eurocurrency liabilities, as defined in Regulation D of the Board of Governors
of the Federal Reserve System as in effect from time to time (expressed as a
decimal), applicable to such Tranche Period plus (ii) 1.0% per annum. The LIBO
Rate shall be rounded, if necessary, to the next higher 1/16 of 1.0%.
"Liquidity Termination Date" means January 5, 2001.
"Master Schedule of Receivables" shall mean a composite Schedule of all
Receivables conveyed from Originator to Seller pursuant to the Sale Agreement,
excluding any Receivables (i) subsequently repurchased or substituted for, (ii)
which were the subject of Upgrade Contracts, and (iii) the Outstanding Balance
on which has been reduced to zero.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition or operations of any Originating Party and its Subsidiaries,
(ii) the ability of any Originating Party to perform its obligations under this
Agreement, (iii) the legality, validity or enforceability of this Agreement or
any other Transaction Document, (iv) the Agent's or any Purchaser's interest in
the Receivables generally or in any significant portion of the Receivables, the
Related Security or the Collections with respect thereto, or (v) the
collectibility of the Receivables generally or of any material portion of the
Receivables.
"Monthly Available Funds" shall mean, on any Settlement Date, the aggregate
of (i) the aggregate Collections received with respect to Receivables during the
related Accrual Period, (ii) all Deemed Collections with respect to such Accrual
Period (to the extent actually deposited in the Collection Account by or on
behalf of the Seller on or prior to such Settlement Date) and any unpaid Deemed
Collections with respect to any earlier Accrual Period (to the extent actually
deposited in the Collection Account by or on behalf of the Seller since the
preceding Settlement Date), (iii) all amounts deposited in the Collection
Account pursuant to Section 1.5 in respect of the conveyance by Agent to Seller
of Charged-Off Receivables on such Settlement Date, (iv) all investment earnings
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on funds in the Designated Accounts, including in any subaccount thereof, (v)
Hedge Receipts for such Settlement Date and (vi) all amounts transferred to the
Collection Account and treated as Monthly Available Funds pursuant to Section
9.2 or Section 9.4.
"Monthly Report" means a report, in substantially the form of Exhibit IX
hereto (appropriately completed), furnished by the Servicer to the Agent and the
Paying Agent pursuant to Section 8.5. In addition to such other information as
may be included therein, each Monthly Report shall set forth the information
specified in Section 1.2(c) of the Sale Agreement and the amounts to be
distributed pursuant to each clause of Section 2.2(a) or Section 2.3, as
applicable.
"Monthly Report Date" means the date specified in Section 8.5(a) on which
the Servicer will forward to the Agent and the Paying Agent the Monthly Report.
"Monthly Shortfall" has the meaning specified in Section 2.2(b).
"Moody's" means Moody's Investors Service, Inc.
"Net Excess Spread" means, for any Accrual Period, the total Collections in
respect of Finance Charge Receivables for such Accrual Period, minus the sum of
(i) the Carrying and Servicing Costs for such Accrual Period, and (ii) the
Accrued Balance of all Receivables which became Charged-Off Receivables during
such Accrual Period (determined for each such Receivable immediately prior to
the time such Receivable became a Charged-Off Receivable).
"Net Excess Spread Percentage" means, for any Accrual Period, the
percentage equivalent of a fraction, the numerator of which is the product of
twelve and the Net Excess Spread for such Accrual Period, and the denominator of
which is the average daily Outstanding Balance of all Receivables during such
Accrual Period.
"Net Receivables Balance" means, at any time, (i) the aggregate Outstanding
Balance of all Eligible Receivables at such time reduced by (ii) the sum at such
time of (x) Excess Concentration Balances and (y) the Outstanding Balance of all
Aged Receivables.
"Obligations" shall have the meaning set forth in Section 2.1.
"Obligor" means a Person obligated to make payments pursuant to a Contract.
"Originated Receivable" means the Indebtedness and other obligations owed
by an Obligor to Originator (without giving effect to any transfer or conveyance
under the Sale Agreement) or Buyer (after giving effect to the transfers under
the Sale Agreement) whether constituting an account, chattel paper, instrument
or general intangible, arising under a contract and includes the obligation to
pay any Finance Charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including Indebtedness and other
rights and obligations represented by an individual invoice, shall constitute an
Originated Receivable separate from an Originated Receivable consisting of the
Indebtedness and other rights and obligations arising from any other
transaction.
"Originating Parties" has the meaning set forth in the preamble to this
Agreement.
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"Originator" means Trendwest Resorts, Inc. in its capacity as Seller under
the Sale Agreement.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Paying Agent" has the meaning set forth in the preamble to this Agreement.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Pooled Commercial Paper" means Commercial Paper notes of Conduit subject
to any particular pooling arrangement by Conduit, but excluding Commercial Paper
issued by Conduit for a tenor and in an amount specifically requested by any
Person in connection with any agreement effected by Conduit.
"Potential Amortization Event" means an event which, with the
passage of time or the giving of notice, or both, would constitute an
Amortization Event.
"Pre-Upgrade Receivable" has the meaning set forth in Section 1.6 of this
Agreement.
"Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"Pro Rata Share" means, for each Financial Institution, the Commitment of
such Financial Institution divided by the Purchase Limit, adjusted as necessary
to give effect to the application of the terms of Sections 14.1 or 14.5.
"Purchase Limit" means the lesser of $75,000,000 and 98.04% of the
aggregate Commitments of the Financial Institutions.
"Purchase Notice" has the meaning set forth in Section 1.2.
"Purchase Price" means, with respect to any Incremental Purchase of a
Purchaser Interest, the amount paid to Seller for such Purchaser Interest which
shall not exceed the least of (i) the amount requested by Seller in the
applicable Purchase Notice, (ii) the excess, if any, of the Purchase Limit over
the aggregate outstanding amount of Capital immediately prior to such proposed
Incremental Purchase and (iii) the excess, if any, of the Outstanding Balance of
Eligible Receivables (less the Aggregate Reserves) on the applicable purchase
date over the aggregate outstanding amount of Capital determined as of the date
of the most recent Monthly Report, adjusted on a pro forma basis to give effect
to such proposed Incremental Purchase.
"Purchased Hedge" means any interest rate swap, cap, option, hedge, or
other derivative instrument, purchased by or on behalf of the Seller, at the
direction of the Agent and acceptable to the Agent, for the primary purpose of
reducing the risk to the Seller or to the Purchaser Interests of changes in
interest rates.
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"Purchaser" means Conduit or a Financial Institution, as applicable.
"Purchaser Interest" means, at any time, an undivided percentage ownership
interest (computed as set forth below) associated with a designated amount of
Capital, selected pursuant to the terms and conditions hereof in (i) all
Receivables arising prior to the time of the most recent computation or
recomputation of such undivided interest, (ii) all Related Security with respect
to such Receivables, and (iii) all Collections with respect to, and other
proceeds of, such Receivables. Each such undivided percentage interest shall
equal:
where: C
--------
NRB - AR
C = the Capital of such Purchaser Interest.
AR = the Aggregate Reserves.
NRB = the Net Receivables Balance.
Such undivided percentage ownership interest shall be initially computed on its
date of purchase. Thereafter, until its Amortization Date, each Purchaser
Interest shall be automatically recomputed (or deemed to be recomputed) on each
day prior to its Amortization Date. The variable percentage represented by any
Purchaser Interest as computed ( or deemed recomputed) as of the close of the
business day immediately preceding its Amortization Date shall remain constant
at all times after such date.
"Receipt" has the meaning set forth in Section 15.2 of this Agreement.
"Receivable" means an Originated Receivable that has been identified for
sale to the Buyer or sold to the Buyer, as the context may require, but shall
not include any Removed Receivable from and after the date on which such Removed
Receivable is repurchased by the Originator hereunder.
"Receivable Documents" shall mean with respect to each Receivable and each
Obligor:
(i) an original Installment Sale Contract;
(ii) a notice of sale and assignment affixed to the Installment
Sale Contract stating the following:
The Receivable described herein has been sold to TW Holdings
III, Inc. pursuant to a Sale Agreement dated as of January 7,
2000 between Trendwest Resorts, Inc. and TW Holdings III, Inc.
Undivided interests in the Receivable described have further
been sold by TW Holdings III, Inc. to Bank One, NA, as Agent,
pursuant to a Receivables Purchase Agreement dated as of
January 7, 2000 among TW Holdings III, Inc., Trendwest
Resorts, Inc., Sage Systems, Inc., International
Securitization Corporation, Bank One, NA (Main Office Chicago)
and the Purchasers named therein.
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(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 Originator
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 Servicer in servicing
receivables comparable to the Receivables.
"Records" means, with respect to any Receivable, all Contracts, other
Receivable Documents and other documents, books, records and other information
(including computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor.
"Reduction Percentage" means, for any Purchaser Interest acquired by the
Financial Institutions from Conduit for less than the Capital of such Purchaser
Interest, a percentage equal to a fraction the numerator of which is the Conduit
Transfer Price Reduction for such Purchaser Interest and the denominator of
which is the Capital of such Purchaser Interest.
"Reference Bank" means Bank One or such other bank as the Agent shall
designate with the consent of Seller.
"Related Security" means, with respect to any Receivable:
(c) all security interests or liens and property subject thereto from time
to time, if any, purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together with
all financing statements and security agreements describing any collateral
securing such Receivable,
(d) all guaranties, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise,
(e) all service contracts and other contracts and agreements associated
with such Receivable,
(f) all Records related to such Receivable,
(g) all of Seller's right, title and interest in, to and under the Sale
Agreement in respect of such Receivable, and
(h) all proceeds of any of the foregoing.
"Released Receivable" shall mean any Receivable which (i) is a Defaulted
Receivable or a Charged-Off Receivable for which Seller has paid the
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consideration specified in Section 1.5, (ii) is a Pre-Upgrade Receivable in
respect of which an Upgrade has occurred and the Upgrade Receivable has been
assigned in accordance with Section 1.6, (iii) is a Diluted Receivable in
respect of which all Deemed Collections have been paid in accordance with
Section 2.11, (iv) is a Charged-off Receivable or a Defaulted Receivable with
respect to which the Vacation Credits have become Repossessed Vacation Credits
and have been repurchased pursuant to Section 1.5(a)(y) or (v) has been paid in
full.
"Removed Receivable" means any Receivable conveyed to Seller from
Originator pursuant to Section 1.1 of the Sale Agreement but subsequently
repurchased or substituted for pursuant to Section 1.5 or otherwise reconveyed
from Seller to Originator.
"Repossessed Vacation Credits" means, with respect to a Charged-off
Receivable or a Defaulted Receivable, Vacation Credits which have been
repossessed from or returned by the Obligor on such Receivable (whether through
foreclosure, repossession, deed in lieu of foreclosure, or other means).
"Required Financial Institutions" means, at any time, Financial
Institutions with Commitments in excess of 66-2/3% of the aggregate Commitments.
"Required Notice Period" means two days.
"Reserve Account" has the meaning set forth in Section 2.8 of this
Agreement.
"Reserve Fund Required Amount" shall mean, as of any date, an amount equal
to 2.0% of the Capital outstanding on such date.
"Resorts and Units" means those properties owned in fee simple by WorldMark
or in which WorldMark has a valid leasehold interest, which Obligors have
limited rights to use under the terms of the Contracts between Originator,
WorldMark and Obligors. This definition includes all Resorts and Units in
existence as of the date of this Agreement or which come into existence during
the term of this Agreement.
"Revolving Period Termination Date" means January 5, 2001, or as extended
upon written notice from the Agent, on behalf of the Purchasers, to the Seller.
"RSA Purchase Date" means (i) a date that is a "Purchase Date" under the
Sale Agreement and (ii) any date on which Seller acquires any Upgrade Receivable
pursuant to the Sale Agreement.
"S&P" means Standard & Poor's Ratings Services.
"Sale Agreement" means that certain Receivables Sale Agreement, dated as of
the date hereof, between the Originator and Seller.
"Schedule of Exceptions" has the meaning set forth in Section 15.1(d) of
this Agreement.
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"Schedule of Receivables" has the meaning set forth in Section 1.1 of the
Sale Agreement.
"Seller" has the meaning set forth in the preamble to this Agreement.
"Servicer" means at any time the Person (which may be the Agent) then
authorized pursuant to Article VIII to service, administer and collect
Receivables.
"Settlement Date" means (a) the 20th day of each month (or, if such day is
not a Business Day, then the next Business Day), and (b) the last day of the
relevant Tranche Period in respect of each Purchaser Interest of the Financial
Institutions.
"Settlement Period" means (a) in respect of each Purchaser Interest of
Conduit, the immediately preceding Accrual Period, and (b) in respect of each
Purchaser Interest of the Financial Institutions, the entire Tranche Period of
such Purchaser Interest.
"Successor Servicer Fee" shall mean, at anytime that TWRI or one of its
Affiliates is not then active as the Servicer, the fees and other amounts
required to provide reasonable compensation to the Servicer in connection with
servicing, administering and collecting the Receivables, which fees and other
amounts shall have been agreed upon by Agent and such Servicer.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, limited liability company, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of Originator.
"Terminating Tranche" has the meaning set forth in Section 4.3(b).
"Three-Month Average Consolidated Charge-Off Ratio" means, as at the end of
any Accrual Period, the average of the Consolidated Charge-off Ratios for such
Accrual Period and each of the two immediately preceding Accrual Periods.
"Three-Month Average Consolidated Delinquency Ratio" means, as at the end
of any Accrual Period, the average of the Consolidated Delinquency Ratio for
such Accrual Period and each of the two immediately preceding Accrual Periods.
"Three-Month Average Consolidated Default Ratio" means, as at the end of
for any Accrual Period, the average of the Consolidated Default Ratios for such
Accrual Period and each of the two immediately preceding Accrual Periods.
"Three-Month Average Charge-Off Ratio" means, as at the end of any Accrual
Period, the average of the Charge-Off Ratios for such Accrual Period and each of
the two immediately preceding Accrual Periods.
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"Three-Month Average Delinquency Ratio" means, as at the end of any Accrual
Period, the average of the Delinquency Ratio for such Accrual Period and each of
the two immediately preceding Accrual Periods.
"Three-Month Average Default Ratio" means, as at the end of any Accrual
Period, the average of the Default Ratios for such Accrual Period and each of
the two immediately preceding Accrual Periods.
"Tranche Period" means, with respect to any Purchaser Interest held by a
Financial Institution:
(i) if Yield for such Purchaser Interest is calculated on the basis of the
LIBO Rate, a period of one, two, three or six months, or such other period as
may be mutually agreeable to the Agent and Seller, commencing on a Business Day
selected by Seller or the Agent pursuant to this Agreement. Such Tranche Period
shall end on the day in the applicable succeeding calendar month which
corresponds numerically to the beginning day of such Tranche Period, provided,
however, that if there is no such numerically corresponding day in such
succeeding month, such Tranche Period shall end on the last Business Day of such
succeeding month; or
(j) if Yield for such Purchaser Interest is calculated on the basis of the
Prime Rate, a period commencing on a Business Day selected by Seller and agreed
to by the Agent, provided no such period shall exceed one month.
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided, however,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding Business Day falls in a new month, such Tranche Period shall end on
the immediately preceding Business Day. In the case of any Tranche Period for
any Purchaser Interest of which commences before the Amortization Date and would
otherwise end on a date occurring after the Amortization Date, such Tranche
Period shall end on the Amortization Date. The duration of each Tranche Period
which commences after the Amortization Date shall be of such duration as
selected by the Agent.
"Transaction Documents" means, collectively, this Agreement, each Purchase
Notice, the Sale Agreement, each Collection Account Agreement, the Fee Letter,
the Subordinated Note (as defined in the Sale Agreement and all other
instruments, documents and agreements executed and delivered in connection
herewith.
"TWRI" shall have the meaning it is given in the preamble.
"TWRI Receivables" shall mean, as of any time, all right to use timeshare
or Vacation Credit receivables originated or serviced by TWRI other than
receivables that have been paid in full or charged off and including the
Receivables.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the specified jurisdiction.
"Unit" means an individual unit of which Resorts and Units are comprised.
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"Upgrade" means the cancellation of an existing Contract and entry into a
new, 84-month Contract by an Obligor, WorldMark and TWRI, pursuant to which the
Obligor purchases additional Vacation Credits.
"Upgrade Contract" means the new Contract entered into by an Obligor, TWRI
and WorldMark related to an Upgrade by such Obligor.
"Upgrade Receivable" has the meaning set forth in Section 1.6 of this
Agreement.
"Vacation Credits" means ownership interests in WorldMark that entitle the
owner to use Resorts and Units.
"WorldMark" has the meaning set forth in the preamble to the Agreement.
"Year 2000 Plan" means a plan to prevent the Year 2000 Problem from having
an adverse effect upon the business, financial condition, operations, property
or prospects of a Person.
"Year 2000 Problem" means, with respect to any Person, the risk that
computer applications directly used by that Person cannot or will not: (a)
handle date information involving any and all dates before, during and/or after
January 1, 2000, including accepting input, providing output and performing date
calculations in whole or in part; (b) operate accurately without interruption on
and in respect of any and all dates before, during and/or after January 1, 2000;
and (c) store and provide date input information without creating any ambiguity
as to the century.
"Yield" means for each respective Tranche Period relating to Purchaser
Interests of the Financial Institutions, an amount equal to the product of the
applicable Discount Rate for each Purchaser Interest multiplied by the Capital
of such Purchaser Interest for each day elapsed during such Tranche Period,
annualized on a 360 day basis.
All accounting terms not specifically defined herein shall be construed in
accordance with GAAP. All terms used in Article 9 of the UCC in the State of
Illinois, and not specifically defined herein, are used herein as defined in
such Article 9.
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EXHIBIT II
FORM OF PURCHASE NOTICE
[Date]
Bank One, NA (Main Office Chicago),
as Agent for the Purchasers parties
to the Receivables Purchase Agreement
referred to below
Suite 0079, 1-21
1 Bank One Plaza
Chicago, Illinois 60670
Attention: Asset Backed Finance
Re: Purchase Notice
Ladies and Gentlemen:
The undersigned refers to the Receivables Purchase Agreement, dated as of
January 7, 2000 (the "Receivables Purchase Agreement," the terms defined therein
being used herein as therein defined), among the undersigned, as Seller and
Trendwest Resorts, Inc. ("Trendwest"), as initial Servicer, Sage Systems, Inc.,
as Custodian, International Securitization Corporation ("Conduit"), certain
Financial Institutions parties thereto and Bank One, NA, as Agent for Conduit
and such Financial Institutions, and hereby gives you notice, irrevocably,
pursuant to Section 1.2 of the Receivables Purchase Agreement, that the
undersigned hereby requests an Incremental Purchase under the Receivables
Purchase Agreement, and in that connection sets forth below the information
relating to such Incremental Purchase (the "Proposed Purchase") as required by
Section 1.2 of the Receivables Purchase Agreement:
(i) The Business Day of the Proposed Purchase is [insert purchase date],
which date is at least two (2) Business Days after the date hereof.
(ii) The requested Purchase Price in respect of the Proposed Purchase is
$__________.
(iii) If the Proposed Purchase to be funded by the Financial Institutions,
the requested Discount Rate is __________ and the requested Tranche Period is
__________.
(iv) Attached hereto is each Schedule of Receivables for any Receivables
either being sold under the Sale Agreement on the date of such Incremental
Purchase or which were sold under the Sale Agreement since the date of the
preceding Incremental Purchase. Each such Schedule of Receivables includes the
applicable RSA Purchase Date.
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The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the date of the Proposed Purchase (before
and after giving effect to the Proposed Purchase):
(a) the representations and warranties of the undersigned set forth in
Section 5.1 of the Receivables Purchase Agreement are true and correct on and as
of the date of such Proposed Purchase as though made on and as of such date;
(b) the Facility Termination Date shall not have occurred, the aggregate
Capital of all Purchaser Interests shall not exceed the Purchase Limit and the
aggregate Purchaser Interests shall not exceed 100%; and
(c) no event has occurred and is continuing, or would result from such
Proposed Purchase, that will constitute an Amortization Event, Potential
Amortization Event or Excess Aged Receivables Event.
The undersigned hereby certifies that the following statements will be true
on the date of the Proposed Purchase (after giving effect to the Proposed
Purchase) (or that, if such statements are not true, then the Seller will not
complete the Proposed Purchase):
(1) all actions and conditions specified in Article XV of the Receivables
Purchase Agreement which are to be taken or satisfied on or prior to the date of
a Proposed Purchase shall have been fully performed or satisfied; and
(2) the amount of funds in the Reserve Account shall equal at least the
Reserve Fund Required Amount.
Very truly yours,
TW HOLDINGS III, INC.
By:________________________________
Name:
Title:
2
<PAGE>
EXHIBIT III
PLACES OF BUSINESS OF THE ORIGINATING PARTIES;
LOCATIONS OF RECORDS;
FEDERAL EMPLOYER IDENTIFICATION NUMBER
Place of Business:
TW Holdings III, Inc.
9805 Willows Road
Redmond, WA 98052
(425) 498-2544
(425) 498-3053 fax
Trendwest Resorts, Inc.
9805 Willows Road
Redmond, WA 98052
(425) 498-2500
(425) 498-3053 fax
Location of Records:
9805 Willows Road
Redmond, WA 98052
(425) 498-2500
(425) 498-3053 fax
Federal Employer Identification Number:
Trendwest Resorts Inc.: 93-1004403
TW Holdings III, Inc.: 91-2014178
<PAGE>
EXHIBIT IV
FORM OF SELLER DIRECTION
TW Holdings, III, Inc.
Seller Direction
Bank One, NA (Main Office Chicago),
as Agent
Asset Backed Finance
Suite 0079, 1-19
1 Bank One Plaza
Chicago, Illinois 60670-0019
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.10(c) of the Receivables Purchase
Agreement, dated as of January 7, 2000, among TW Holdings III, Inc., (the
"Seller"), Trendwest Resorts, Inc., as Servicer, Sage Systems, Inc., as
Custodian, and Bank One, NA (Main Office Chicago) as Agent and Paying Agent, you
are hereby requested to release the Receivables listed on Schedule A hereto in
exchange for $_______. The undersigned hereby certifies that (i) the amount set
forth in the previous sentence equals the sum of the Outstanding Balances of the
Receivables listed in Schedule A plus all accrued and unpaid interest thereon
and (ii) in choosing the Receivables to be released, the Seller has not used a
selection process that identified any of the Receivables being released as any
more desirable than the Receivables retained by the Agent on behalf of the
Purchasers.
IN WITNESS WHEREOF, the undersigned has executed this direction this ___
day of _____, ____.
TW HOLDINGS III, INC.
By: __________________________
Name:
Title
<PAGE>
SCHEDULE A TO SELLER DIRECTION
SCHEDULE OF RECEIVABLES
EXHIBIT V
FORM OF COMPLIANCE CERTIFICATE
To: Bank One, NA (Main Office Chicago), as Agent
This Compliance Certificate is furnished pursuant to that certain
Receivables Purchase Agreement dated as of January 7, 2000 among TW Holdings
III, Inc., (the "Seller"), Trendwest Resorts, Inc. (the "Servicer"), Sage
Systems, Inc., as Custodian, the Purchasers party thereto and Bank One, NA, as
agent and paying agent for such Purchasers (the "Agreement").
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________ of Seller.
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Seller and its Subsidiaries during the accounting period
covered by the attached financial statements.
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes an
Amortization Event, Potential Amortization Event, Hedge Accumulation Event or
Excess Aged Receivables Event, as each such term is defined under the Agreement,
during or at the end of the accounting period covered by the attached financial
statements or as of the date of this Certificate, except as set forth in
paragraph 5 below.
4. Schedule I attached hereto sets forth financial data and computations
evidencing the compliance with certain covenants of the Agreement, all of which
data and computations are true, complete and correct.
5. Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which Seller has taken, is taking, or proposes to take
with respect to each such condition or event:
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ____ day of _________, ____.
TRENDWEST RESORTS, INC.
By:__________________________________
Name:
Title:
<PAGE>
SCHEDULE I TO COMPLIANCE REPORT
A. Schedule of Compliance as of __________, ____ with Section ___ of the
Agreement. Unless otherwise defined herein, the terms used in this
Compliance Certificate have the meanings ascribed thereto in the
Agreement.
This Schedule relates to the month ended: ______________
<PAGE>
EXHIBIT VI
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is entered into as of the ___ day of
____________, ____, by and between________________________________ ("Seller")
and _____________________________________________ ("Purchaser").
PRELIMINARY STATEMENTS
A. This Assignment Agreement is being executed and delivered in accordance
with Section 12.1(b) of that certain Receivables Purchase Agreement dated as of
January 7, 2000 by and among TW Holdings III, Inc., as Seller, Trendwest
Resorts, Inc., as Servicer, Sage Systems, Inc., as Custodian, International
Securitization Corporation ("Conduit"), Bank One, NA, as Agent and Paying Agent,
and the Financial Institutions party thereto (as amended, modified or restated
from time to time, the "Purchase Agreement"). Capitalized terms used and not
otherwise defined herein are used with the meanings set forth or incorporated by
reference in the Purchase Agreement.
B. The Seller is a Financial Institution party to the Purchase Agreement,
and the Purchaser wishes to become a Financial Institution thereunder; and
C. The Seller is selling and assigning to the Purchaser an undivided
____________% (the "Transferred Percentage") interest in all of Seller's rights
and obligations under the Purchase Agreement and the Transaction Documents,
including the Seller's Commitment and (if applicable) the Capital of the
Seller's Purchaser Interests as set forth herein;
The parties hereto hereby agree as follows:
1. This sale, transfer and assignment effected by this Assignment Agreement
shall become effective (the "Effective Date") two (2) Business Days (or such
other date selected by the Agent in its sole discretion) following the date on
which a notice substantially in the form of Schedule II to this Assignment
Agreement ("Effective Notice") is delivered by the Agent to Conduit, the Seller
and the Purchaser. From and after the Effective Date, the Purchaser shall be a
Financial Institution party to the Purchase Agreement for all purposes thereof
as if the Purchaser were an original party thereto and the Purchaser agrees to
be bound by all of the terms and provisions contained therein.
2. If the Seller has no outstanding Capital under the Purchase Agreement,
on the Effective Date, Seller shall be deemed to have hereby transferred and
assigned to the Purchaser, without recourse, representation or warranty (except
as provided in paragraph 6 below), and the Purchaser shall be deemed to have
hereby irrevocably taken, received and assumed from the Seller, the Transferred
Percentage of the Seller's Commitment and all rights and obligations associated
therewith under the terms of the Purchase Agreement, including the Transferred
<PAGE>
Percentage of the Seller's future funding obligations under Section 4.1 of the
Purchase Agreement.
3. If the Seller has any outstanding Capital under the Purchase Agreement,
at or before 12:00 noon, local time of the Seller, on the Effective Date the
Purchaser shall pay to the Seller, in immediately available funds, an amount
equal to the sum of (i) the Transferred Percentage of the outstanding Capital of
the Seller's Purchaser Interests (such amount, being hereinafter referred to as
the "Purchaser's Capital"); (ii) all accrued but unpaid (whether or not then
due) Yield attributable to the Purchaser's Capital; and (iii) accruing but
unpaid fees and other costs and expenses payable in respect of the Purchaser's
Capital for the period commencing upon each date such unpaid amounts commence
accruing, to and including the Effective Date (the "Purchaser's Acquisition
Cost");
whereupon, the Seller shall be deemed to have sold, transferred and assigned to
the Purchaser, without recourse, representation or warranty (except as provided
in paragraph 6 below), and the Purchaser shall be deemed to have hereby
irrevocably taken, received and assumed from the Seller, the Transferred
Percentage of the Seller's Commitment and the Capital of the Seller's Purchaser
Interests (if applicable) and all related rights and obligations under the
Purchase Agreement and the Transaction Documents, including the Transferred
Percentage of the Seller's future funding obligations under Section 4.1 of the
Purchase Agreement.
4. Concurrently with the execution and delivery hereof, the Seller will
provide to the Purchaser copies of all documents requested by the Purchaser
which were delivered to such Seller pursuant to the Purchase Agreement.
5. Each of the parties to this Assignment Agreement agrees that at any time
and from time to time upon the written request of any other party, it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Assignment Agreement.
6. By executing and delivering this Assignment Agreement, the Seller and
the Purchaser confirm to and agree with each other, the Agent and the Financial
Institutions as follows: (a) other than the representation and warranty that it
has not created any Adverse Claim upon any interest being transferred hereunder,
the Seller makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made by any other
Person in or in connection with the Purchase Agreement or the Transaction
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Purchaser, the Purchase Agreement or any other
instrument or document furnished pursuant thereto or the perfection, priority,
condition, value or sufficiency of any collateral; (b) the Seller makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Seller, any Obligor, or any Seller Affiliate or the
performance or observance by the Seller, any Obligor, or any Seller Affiliate of
any of their respective obligations under the Transaction Documents or any other
instrument or document furnished pursuant thereto or in connection therewith;
(c) the Purchaser confirms that it has received a copy of the Transaction
Documents, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
2
<PAGE>
Assignment Agreement; (d) the Purchaser will, independently and without reliance
upon the Agent, Conduit, the Seller or any other Financial Institution or
Purchaser and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Purchase Agreement and the Transaction Documents;
(e) the Purchaser appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Transaction Documents as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (f) the Purchaser appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Transaction Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; and (g)
the Purchaser agrees that it will perform in accordance with their terms all of
the obligations which, by the terms of the Purchase Agreement and the
Transaction Documents, are required to be performed by it as a Financial
Institution or, when applicable, as a Purchaser.
7. Each party hereto represents and warrants to and agrees with the Agent
that it is aware of and will comply with the provisions of the Purchase
Agreement, including Sections 4.1, 14.1 and 16.6 thereof.
8. Schedule I hereto sets forth the revised Commitment of the Seller and
the Commitment of the Purchaser, as well as administrative information with
respect to the Purchaser.
9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
10. The Purchaser hereby covenants and agrees that, prior to the date which
is one year and one day after the payment in full of all senior Indebtedness for
borrowed money of Conduit, it will not institute against, or join any other
Person in instituting against, Conduit any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers of the
date hereof.
By: ______________________________
Title: ____________________________
By: ______________________________
Title: _____________________________
3
<PAGE>
SCHEDULE I TO ASSIGNMENT AGREEMENT
LIST OF LENDING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
Date: _______________, ____
Transferred Percentage: ________%
A-1 A-2 B-1 B-2
--- --- --- ---
Outstanding
Commitment Commitment Capital Ratable
Seller [existing] [revised] (if any) Share
- ------ --------- --------- ----------- -------
A-1 B-1 B-2
--- --- ---
Outstanding
Commitment Capital Ratable
Purchaser [initial] (if any) Share
- --------- ---------- ----------- -------
Address for Notices
- -------------------
Attention:
Phone:
Fax:
<PAGE>
SCHEDULE II TO ASSIGNMENT AGREEMENT
EFFECTIVE NOTICE
TO
------------------------
------------------------
------------------------
TO:
------------------------
------------------------
------------------------
The undersigned, as Agent under the Purchase Agreement dated as of January
7, 2000 by and among TW Holdings III, Inc., as Seller, Trendwest Resorts, Inc.,
as Servicer, Sage Systems, Inc., as Custodian, International Securitization
Corporation, Bank One, NA (Main Office Chicago), as Paying Agent and Agent, and
the Financial Institutions party thereto, hereby acknowledges receipt of
executed counterparts of a completed Assignment Agreement dated as of
____________, ____ between __________________, as Seller, and
__________________, as Purchaser. Terms defined in such Assignment Agreement are
used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Effective Date will be _______________________, ____.
2. Conduit hereby consents to the Assignment Agreement as required by
Section 12.1(b) of the Purchase Agreement.
3. Pursuant to such Assignment Agreement, the Purchaser is required to pay
$____________ to the Seller at or before 12:00 noon (local time of the Seller)
on the Effective Date in immediately available funds.
<PAGE>
Very truly yours,
BANK ONE, NA, individually and as Agent
By: _____________________________
Title: ____________________________
INTERNATIONAL SECURITIZATION
CORPORATION
By: ______________________________
Authorized Signatory
2
<PAGE>
EXHIBIT VII
CREDIT AND COLLECTION POLICY
<PAGE>
EXHIBIT VIII
FORM OF VACATION OWNER AGREEMENTS
<PAGE>
EXHIBIT IX
FORM OF MONTHLY REPORT
<PAGE>
EXHIBIT X
FORM OF REQUEST FOR RELEASE
SAGE SYSTEMS, INC.
2135 112th Avenue, N.E., Suite 101
Bellevue, Washington 98004
Re: Receivables Purchase Agreement dated as of January 7, 2000, among TW
Holdings III, Inc., as Seller, Trendwest Resorts, Inc., as Servicer, Sage
Systems, Inc., as Custodian, International Securitization Corporation, and Bank
One NA, as Agent and Paying Agent (the "RPA")
Pursuant to Sections 2.10 and 15.3(d) of the above-referenced RPA, 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 "Definitions" attached as Exhibit I to the RPA.
Purchase Number:
Reason for Requesting Release (check all that apply)
___ 1. Liquidation
___ 2. Breach of representation and warranty
___ 3. Missing Receivable Documents
___ 4. Failure to file financing statements
___ 5. Cease to be an Eligible Receivable
___ 6. Paid in Full
___ 7. Upgrade
BANK ONE, NA(Main Office Chicago),
By:___________________________
Name:
Title:
<PAGE>
Release consented to:
[PURCHASERS]
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT XI
FORM OF RECEIPT
RECEIPT NO.[Date]
Re: Receivables Purchase Agreement dated as of January 7, 2000, among TW
Holdings III, Inc., as Seller, Trendwest Resorts, Inc., as Servicer, Sage
Systems, Inc., as Custodian, International Securitization Corporation, and Bank
One, NA, as Agent and Paying Agent (the "RPA")
Ladies and Gentlemen:
In accordance with the provisions of Section 15.2 of the above-referenced
RPA, 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 RPA 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 Agent).
The Custodian hereby confirms that it is holding each such Receivable
Document as agent and bailee of the Agent, as agent for the Purchasers, pursuant
to the terms of the RPA. The Custodian hereby confirms it will act in accordance
with the standard of care standard provided in the RPA and under no
circumstances shall the Custodian (i) deliver possession of any Receivable
Document to the Seller 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 Agent.
SAGE SYSTEMS, INC.,
as Custodian
By: __________________________
Name:
Title:
<PAGE>
SCHEDULE A TO RECEIPT
SCHEDULE OF RECEIVABLES
<PAGE>
EXHIBIT XII
ACCOUNT NUMBERS
Account Bank Name and Address Account Number
- --------------------------------------------------------------------------------
Clearing Account Commerce Bank of Washington 1146602
601 Union Street
Suite 3900
Seattle, WA 98101
- ------------------- ---------------------------------------------- -------------
Collection Account Bank One, NA (Main Office Chicago) 0400045000
1 Bank One Plaza
Chicago, Illinois 60670-0019
- ------------------- ---------------------------------------------- -------------
Reserve Account Bank One, NA (Main Office Chicago) 0400045001
1 Bank One Plaza
Chicago, Illinois 60670-0019
- ------------------- ---------------------------------------------- -------------
Hedge Account Bank One, NA (Main Office Chicago)
1 Bank One Plaza
Chicago, Illinois 60670-0019 0400045002
- ------------------- ---------------------------------------------- -------------
<PAGE>
SCHEDULE A
COMMITMENTS OF FINANCIAL INSTITUTIONS
Financial Institution Commitment
- --------------------- ----------
Bank One, NA (Main Office Chicago) $76,500,000
<PAGE>
SCHEDULE B
DOCUMENTS TO BE DELIVERED TO THE AGENT
ON OR PRIOR TO THE INITIAL PURCHASE
1. Copy of the Resolutions of the Board of Directors of each Originating Party
certified by its Secretary authorizing such Originating Party's execution,
delivery and performance of this Agreement and the other documents to be
delivered by it hereunder.
2. Articles or Certificate of Incorporation of each Originating Party
certified by the Secretary of State of its jurisdiction of incorporation on
or within thirty (30) days prior to the initial Purchase.
3. Good Standing Certificate for each Originating Party issued by the
Secretaries of State of California, Oregon and Washington.
4. A certificate of the Secretary of each Originating Party certifying (i) the
names and signatures of the officers authorized on its behalf to execute
this Agreement and any other documents to be delivered by it thereunder and
(ii) a copy of such Originating Party's By-Laws.
5. Time stamped receipt copies of proper financing statements, duly filed
under the UCC on or before the date of such initial Purchase in all
jurisdictions as may be necessary or, in the opinion of the Agent,
desirable, under the UCC of all appropriate jurisdictions or any comparable
law in order to perfect the ownership interests contemplated by this
Agreement.
6. Delivered simultaneous to the Initial Purchase, executed copies of proper
releases and UCC termination statements, ready for filing, if any,
necessary to release all security interests and other rights of any Person
in the Receivables, Contracts or Related Security previously granted by
Originator.
7. A favorable opinion of legal counsel for the Originating Parties reasonably
acceptable to the Agent which addresses the following matters and such
other matters as the Agent may reasonably request:
-- Each Originating Party is a corporation duly
incorporated, validly existing, and in good standing
under the laws of its state of incorporation.
-- Each Originating Party has all requisite authority to
conduct its business in each jurisdiction where
failure to be so qualified would have a material
adverse effect on such Originating Party's business.
-- The execution and delivery by each Originating Party
of this Agreement and each other Transaction Document
<PAGE>
to which it is a party and its performance of its
obligations thereunder have been duly authorized by
all necessary corporate action and proceedings on the
part of such Originating Party and will not:
(a) require any action by or in respect of, or
filing with, any governmental body, agency
or official (other than the filing of UCC
financing statements);
(b) contravene, or constitute a default under,
any provision of applicable law or
regulation or of its Articles of
Incorporation or Bylaws or of any agreement,
judgment, injunction, order, decree or other
instrument binding upon such Originating
Party; or
(c) result in the creation or imposition of any
Adverse Claim on assets of such Originating
Party or any of its Subsidiaries (except as
contemplated by this Agreement).
-- This Agreement and each other Transaction Document to
which such Originating Party is a Party has been duly
executed and delivered by such Originating Party and
constitutes the legal, valid, and binding obligation
of such Originating Party, enforceable in accordance
with its terms, except to the extent the enforcement
thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors'
rights generally and subject also to the availability
of equitable remedies if equitable remedies are
sought.
-- Seller has a valid, perfected and first priority
ownership interest in each Receivable in existence as
of the date of the Agreement and, if a Purchase is
made as of such date, the Agent for the benefit of
the Purchasers shall acquire a first perfected
priority ownership interest in each Receivable, the
related Collections and the Related Security.
-- To the best of the opinion giver's knowledge, there
is no action, suit or other proceeding against any
Originating Party or any Affiliate of any Originating
Party, which would materially adversely affect the
business or financial condition of such Originating
Party and its Affiliates taken as a whole or which
would materially adversely affect the ability of
Seller to perform its obligations under this
Agreement.
-- None of the Originating Parties is an "investment
company" registered or required to be registered
under the Investment Company Act of 1940.
8. If requested by Conduit or the Agent, a favorable opinion of legal counsel
for each Financial Institution, reasonably acceptable to the Agent which
addresses the following matters:
2
<PAGE>
-- This Agreement has been duly authorized by all
necessary corporate action of the Financial
Institution.
-- This Agreement has been duly executed and delivered
by the Financial Institution and, assuming due
authorization, execution and delivery by each of the
other parties thereto, constitutes a legal, valid and
binding obligation of the Financial Institution,
enforceable against the Financial Institution in
accordance with its terms.
9. A Compliance Certificate.
10. The Fee Letter.
11. A form of Monthly Report.
12. Executed copies of (i) all consents from and authorizations by any Persons
and (ii) all waivers and amendments to existing credit facilities, that are
necessary in connection with this Agreement.
13. For each Purchaser that is not incorporated under the laws of the United
States of America, or a state thereof, two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either
case that such Purchaser is entitled to receive payments under the
Agreement without deduction or withholding of any United States federal
income taxes.
14. An executed copy of the Receivables Sale Agreement, together with copies of
each of the documents delivered pursuant to Section 3.1 thereof.
15. State of Washington Public Offering Documents including (i) Declaration of
Vacation Owner Program for WorldMark certified by State of Washington
Department of Real Estate, (ii) statement compliance with registration
requirements of Oregon, Hawaii and California, and (iii) statement of clear
title to WorldMark properties.
16. Initial Purchase Notice.
17. Results of UCC searches conducted in the States of Washington, Oregon and
Delaware as of a date on or after December 20, 1999 against each
Originating Party as debtor showing no liens or financing statements filed
against either Originating Party which create security interests in the
Receivables that would rank prior to the security interests granted under
the Transaction Documents.
3
<PAGE>
SCHEDULE C
EXISTING ENVIRONMENTAL CLAIMS
None
RECEIVABLES SALE AGREEMENT
DATED AS OF JANUARY 7, 2000
BETWEEN
TRENDWEST RESORTS, INC.
as Originator
AND
TW HOLDINGS III, INC.
as Buyer
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES..... .............................1
Section 1.1 Purchases of Receivables............................1
Section 1.2 Payment for the Purchases...........................3
Section 1.3 Adjustments for Dilutions...........................4
Section 1.4 Repurchase of Receivables...........................5
Section 1.5 Upgrade Contracts...................................7
Section 1.6 Payments and Computations, Etc......................7
Section 1.7 Transfer of Records.................................8
Section 1.8 Characterization....................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES......................................9
Section 2.1 Representations and Warranties of Originator........9
ARTICLE III CONDITIONS OF PURCHASES...........................................14
Section 3.1 Conditions Precedent to Initial Purchase...........14
Section 3.2 Conditions Precedent to All Purchases..............14
ARTICLE IV COVENANTS..........................................................15
Section 4.1 Affirmative Covenants of Originator................15
Section 4.2 Negative Covenants of Originator...................20
ARTICLE V AMORTIZATION EVENTS.................................................21
Section 5.1 Amortization Events................................21
Section 5.2 Remedies...........................................22
ARTICLE VI INDEMNIFICATION....................................................23
Section 6.1 Indemnities by Originator..........................23
Section 6.2 Other Costs and Expenses...........................26
i
<PAGE>
ARTICLE VII MISCELLANEOUS.....................................................26
Section 7.1 Waivers and Amendments.............................26
Section 7.2 Notices............................................26
Section 7.3 Protection of Ownership Interests of Buyer.........27
Section 7.4 Confidentiality....................................28
Section 7.5 Bankruptcy Petition................................28
Section 7.6 CHOICE OF LAW......................................28
Section 7.7 CONSENT TO JURISDICTION............................28
Section 7.8 WAIVER OF JURY TRIAL...............................29
Section 7.9 Integration; Binding Effect; Survival of
Terms..............................................29
Section 7.10 Counterparts; Severability; Section References.....30
ii
<PAGE>
Exhibits and Schedules
------------------------
Exhibit I - Definitions
Exhibit II - Principal Place of Business; Location(s) of Records;
Federal Employer Identification Number
Exhibit III - Account Numbers
Exhibit IV - Form of Compliance Certificate
Exhibit V - Credit and Collection Policy
Exhibit VI - Form of Subscription Agreement
Exhibit VII - Form of Subordinated Note
Exhibit VIII - Form of Vacation Owner Agreement
Exhibit IX - Form of Sale Assignment
Schedule A - List of Documents to Be Delivered to Buyer Prior to the
Initial Purchase
iii
<PAGE>
RECEIVABLES SALE AGREEMENT
THIS RECEIVABLES SALE AGREEMENT, dated as of January 7, 2000 is by and
between Trendwest Resorts, Inc. ("TWRI"), an Oregon corporation ("Originator"),
TW Holdings III, Inc., a Delaware corporation ("Buyer"). Unless defined
elsewhere herein, capitalized terms used in this Agreement shall have the
meanings assigned to such terms in Exhibit I.
PRELIMINARY STATEMENTS
Originator now owns, and from time to time hereafter will own, Receivables.
Originator wishes to sell and assign to Buyer, and Buyer wishes to purchase from
Originator, all of Originator's right, title and interest in and to such
Receivables, together with the Related Security and Collections with respect
thereto.
Originator and Buyer intend the transactions contemplated hereby to be true
sales of the Receivables from Originator to Buyer, providing Buyer with the full
benefits of ownership of the Receivables, and Originator and Buyer do not intend
these transactions to be, or for any purpose to be characterized as, loans from
Buyer to Originator.
Upon each purchase of Receivables from Originator, Buyer will sell
undivided interests therein and in the associated Related Security and
Collections pursuant to that certain Receivables Purchase Agreement dated as of
January 7, 2000 (as the same May from time to time hereafter be amended,
supplemented, restated or otherwise modified, the "Purchase Agreement") among
Buyer, Originator, as Servicer, International Securitization Corporation
("Conduit"), the financial institutions from time to time party thereto as
"Financial Institutions" and Bank One, NA (Main Office Chicago), or any
successor agent appointed pursuant to the terms of the Purchase Agreement, as
agent for Conduit and such Financial Institutions (in such capacity, the
"Agent").
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1 Purchases of Receivables.
(a) On each Purchase Date hereunder, in consideration for the Purchase
Price and upon the terms and subject to the conditions set forth herein,
Originator shall sell, assign, transfer, set-over and otherwise convey to Buyer,
without recourse (except to the extent expressly provided herein), and Buyer
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shall purchase from Originator, all of Originator's right, title and interest in
and to all Receivables identified in the related Schedule of Receivables,
together with all Related Security relating thereto and all Collections thereof;
provided, however, that in no event shall Buyer be obligated to purchase, or
Originator be obligated to sell, any Receivable arising after the Amortization
Date. In accordance with the preceding sentence, on the date of the initial
Purchase, Buyer shall acquire all of Originator's right, title and interest in
and to all Receivables identified in the related Schedule of Receivables,
together with all Related Security relating thereto and all Collections thereof.
The acquisition by Buyer of the right, title and interest of Originator in the
applicable Receivables in connection with each Purchase hereunder is conditioned
upon and subject to Originator's receipt of the Purchase Price therefor in
accordance with Section 1.2.
(b) Not less than five Business Days prior to each date which Originator
proposes to be a Purchase Date, Originator shall deliver to Buyer (i) a notice
that Originator proposes to sell Receivables to Buyer on the specified Purchase
Date, and (ii) a Schedule of the Originated Receivables that Originator proposes
to sell to Buyer on such Purchase Date (a "Draft Schedule of Receivables"). The
Originator shall also deliver to the Custodian, for each Originated Receivable
on the Draft Schedule of Receivables, each Receivable Document listed in the
definition of "Receivable Documents."
(c) If Buyer is unwilling to effect a Purchase of Receivables on such
proposed Purchase Date, or if Buyer is willing to purchase some, but not all, of
such Originated Receivables on such proposed Purchase Date, then Buyer shall
deliver to Purchaser, within two Business Days following Buyer's receipt of
Originator's notice, a notice to such effect, including (if Buyer is willing to
purchase some but not all such Originated Receivables), a Schedule of the
Originated Receivables which Buyer is willing to purchase. If Buyer is unwilling
to effect a Purchase of Receivables on such Purchase Date, then such proposed
Purchase Date shall be abandoned. Otherwise, on such Purchase Date, a purchase
and sale of the Originated Receivables specified on the Schedule delivered by
Originator (or, if Buyer delivered a Schedule as provided in the preceding
sentence, then a purchase and sale of the Originated Receivables specified on
such Schedule (the applicable Schedule being the "Schedule of Receivables" for
such Purchase Date), shall occur pursuant to Section 1.1(a) on such Purchase
Date (subject to compliance with the conditions specified in Article III).
(d) In connection with consummation of any Purchase hereunder, Originator
will deliver to the Custodian an (i) executed Sale Assignment (substantially in
the form as Exhibit IX hereto) and (ii) the Schedule of Receivables. Buyer May
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request that Originator deliver, and Originator shall deliver, such approvals,
opinions, information, reports or documents as Buyer May reasonably request.
(e) It is the intention of the parties hereto that each Purchase of
Receivables made hereunder shall constitute a "true sale", which sales are
absolute and irrevocable and provide Buyer with the full benefits of ownership
of the Receivables. Except for adjustments for dilution pursuant to Section 1.3,
each sale of Receivables hereunder is made without recourse to Originator;
provided, however, that (i) Originator shall be liable to Buyer for all
representations, warranties and covenants made by Originator pursuant to the
terms of the Transaction Documents to which Originator is a party, and (ii) such
sale does not constitute and is not intended to result in an assumption by Buyer
or any assignee thereof of any obligation of Originator or any other Person
arising in connection with the Receivables, the related Contracts and/or other
Related Security or any other obligations of Originator. In view of the
intention of the parties hereto that the Purchases of Receivables made hereunder
shall constitute sales of such Receivables rather than loans secured thereby,
Originator agrees that it will, on or prior to the date hereof and in accordance
with Sections 4.1(e)(ii) and 4.2(f), mark its master data processing records
relating to the Receivables with a legend acceptable to Buyer and to the Agent
(as Buyer's assignee), evidencing that Buyer has purchased such Receivables as
provided in this Agreement and to note in its financial statements that such
Receivables have been sold to Buyer. Upon the request of Buyer or the Agent (as
Buyer's assignee), Originator or its Affiliate will execute and file such
financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as May be necessary or
appropriate to perfect and maintain the perfection of Buyer's ownership interest
in the Receivables and the Related Security and Collections with respect
thereto, or as Buyer or the Agent (as Buyer's assignee) May reasonably request.
Section 1.2 Payment for the Purchases.
(a) Upon acceptance and approval by the Custodian of the documents
specified in Section 1.1(d) , the Buyer will transfer or cause to be transferred
to the Originator, an amount equal to the Purchase Price with respect to such
Purchase of Receivables. The Purchase Price for each Purchase shall be payable
in full by Buyer to Originator on the date of such Purchase, and shall be paid
to Originator in the following manner:
(i) by delivery of immediately available funds, to the extent of
(x) funds made available to Buyer in connection with its subsequent
sale of an interest in such Receivables to the Purchasers under the
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Purchase Agreement and (y) any Collections on Receivables or other
funds available to Buyer on such Purchase Date; and
(ii) the balance, by accepting a contribution to its capital
and/or with the proceeds of a borrowing from Originator of a
subordinated revolving loan (each, a "Subordinated Loan") in such
amounts as determined by Buyer, provided that the Subordinated Loan
made on the date of the initial Purchase by the Originator shall not
cause Net Worth to be less than the Required Capital Amount.
Subject to the limitations set forth in the preceding clause (ii), Originator
irrevocably agrees to advance each Subordinated Loan requested of it by Buyer on
or prior to the Facility Termination Date. The Subordinated Loans owing to
Originator shall be evidenced by, and shall be payable in accordance with the
terms and provisions of, the Subordinated Note and shall be payable solely from
funds which the Buyer is not required under the Purchase Agreement to set aside
for the benefit of, or otherwise pay over to, the Agent for the benefit of the
Purchasers.
(b) On each Settlement Date related to a Calculation Period, all
Collections paid to Buyer pursuant to the terms of the Purchase Agreement shall
be paid to the Originator to reduce the amounts owed by Buyer to Originator
under the Subordinated Note. If the balance on the Subordinated Note has been
reduced to zero and all other amounts owed thereunder have been paid, then Buyer
shall be entitled to retain any remaining Collections.
(c) In addition to such other information as May be included therein, each
Monthly Report shall set forth the following with respect to the related
Calculation Period: (i) the aggregate Outstanding Balance of Receivables created
by the Originator and conveyed in Purchases during such Calculation Period, as
well as the Net Receivables Balance (as defined in the Purchase Agreement)
included therein, (ii) the aggregate Purchase Price payable to the Originator in
respect of such Purchases, (iii) the aggregate amount of funds received by such
Originator during such Calculation Period which are to be applied toward the
aggregate Purchase Price owing for such Calculation Period pursuant to the first
sentence of this paragraph, (iv) the increase or decrease in the amount
outstanding under the Subordinated Note as of the end of such Calculation Period
after giving effect to the application of funds in paragraph (b) above and the
restrictions on Subordinated Loans set forth in paragraph (a) above, and (v) the
amount of any capital contribution made by to Buyer as of the end of such
Calculation Period pursuant to paragraph (a) above.
Section 1.3 Adjustments for Dilutions. If on any day:
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(a) the Outstanding Balance of a Receivable is:
(i) reduced as a result of any defective or rejected goods or
services, rescission of a Contract, any discount or any adjustment or
otherwise by Originator (other than cash Collections on account of the
Receivables),
(ii) reduced or canceled as a result of a setoff in respect of
any claim by any Person (whether such claim arises out of the same or
a related transaction or an unrelated transaction), or
(b) any of the representations and warranties set forth in Article II are
no longer true with respect to any Receivable,
then, in such event, Originator shall deposit into the Collection Account on the
second Business Day following the date (the "Dilution Date") of occurrence of an
event described in paragraphs (a) or (b) of this Section 1.3, an amount in
immediately available funds equal to the Accrued Balance of such Receivable as
of the Dilution Date.
Section 1.4 Repurchase of Receivables.
(a) From time to time the Buyer May convey back to Originator, at
Originator's option, (x) to the extent permitted pursuant to Section 1.4(c), any
Receivable which constituted a Charged-Off Receivable or a Defaulted Receivable
as of the last day of the related Calculation Period and (y) to the extent
permitted by Section 1.4(e), any Vacation Credit which constituted a Repossessed
Vacation Credit as of the last day of the related Calculation Period. Originator
shall provide the Agent with irrevocable written notice prior to the date upon
which such reconveyance shall occur of its intention to cause such reconveyance
to occur, which notice shall (i) state the amount of each form of consideration
described in Sections 1.4(b) and 1.4(e) which shall be paid to Buyer on such
Settlement Date, (ii) identify the Charged-Off Receivables or Defaulted
Receivables to be reconveyed to Seller and (iii) otherwise be satisfactory in
form and substance to Buyer.
(b) As consideration for the reconveyance of a Receivable pursuant to
Section 1.4(a)(x), Originator shall provide to Buyer, in immediately available
funds, an amount equal to the Outstanding Balance of such Receivable (prior to
any write-off thereof).
(c) The aggregate Outstanding Balance of Receivables (prior to any
write-off thereof) reconveyed pursuant to Section 1.4(a)(x) shall (i) at no time
exceed 10% of the result of (a) the aggregate initial Outstanding Balance of all
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Receivables conveyed from the Originator to the Buyer on any Purchase Date
reduced by (b) the aggregate Outstanding Balance (prior to any write-off
thereof) of all Receivables subsequently reconveyed from the Buyer to the
Originator, and (ii) in no one calendar year exceed $7,500,000.
(d) As consideration for any reconveyance pursuant to Section 1.4(a)(y) of
a Repossessed Vacation Credit, on the applicable Settlement Date, Originator
shall pay to Buyer in immediately available funds an amount equal to 25% of the
original purchase price paid by the defaulting Obligor for such Vacation Credit.
(e) Originator May not repurchase Repossessed Vacation Credits at any time
pursuant to Section 1.4(a)(y) unless each of the following conditions is
satisfied:
(i) either the Amortization Date or the Revolving Period
Termination Date has occurred under the Purchase Agreement;
(ii) Originator has theretofore repurchased the maximum amount of
Charged-off Receivables and Defaulted Receivables permitted to be
repurchased at such time pursuant to Sections 1.4(a)(x) and 1.4(c);
and
(iii) the aggregate Outstanding Balance of all Charged-off
Receivables and Defaulted Receivables related to Repossessed Vacation
Credits which have been repurchased pursuant to Section 1.4(a)(y),
including the Repossessed Vacation Credits to be repurchased on such
Settlement Date, does not exceed an amount equal to 5.0% of the
Outstanding Balance of Eligible Receivables as of the earlier to occur
of the Amortization Date and the Revolving Period Termination Date.
Seller May not repurchase any Repossessed Vacation Credits relating to a
Charged-off Receivable or a Defaulted Receivable unless Seller repurchases all
of the Repossessed Vacation Credits relating to such Charged-off Receivable or
Defaulted Receivable at such time.
(f) The rights of Originator pursuant to this Section 1.4 to repurchase
Charged-off Receivables, Defaulted Receivables and Repossessed Vacation Credits
shall be subject and subordinate to the rights of the Agent pursuant to Section
10.2 of the Purchase Agreement to sell, dispose or otherwise liquidate the
Receivables and the Related Security following the occurrence of an Amortization
Event. Such rights of the Originator shall not apply to any Charged-off
Receivables, Defaulted Receivables or Repossessed Vacation Credits which the
Agent or any Servicer has sold, nor shall they apply to any Charged-off
Receivables, Defaulted Receivables or Repossessed Vacation Credits as to which
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the Agent or any Servicer has provided at least five Business Days prior notice
to the Seller of its intention so to sell (unless, prior to the expiration of
such five Business Days, Originator has irrevocably committed to purchase such
Charged-off Receivables, Defaulted Receivables or Repossessed Vacation Credits
on the next succeeding Settlement Date).
Section 1.5 Upgrade Contracts.
(a) If at any time the Obligor of a Receivable enters into an Upgrade
Contract, Originator shall deliver (i) to the Buyer a notice indicating such
Upgrade and identifying the Receivable (the "Upgrade Receivable") represented by
such Upgrade Contract and (ii) to the Custodian, the Receivable Documents
related to such Upgrade Receivable.
(b) Buyer shall pay to Originator, in immediately available funds, an
amount equal to the excess, if any, of (x) the Outstanding Balance of such
Upgrade Receivable over (y) the Outstanding Balance of the existing receivable
(the "Pre-Upgrade Receivable") to which it is related.
(c) The Buyer will subsequently deliver to the Agent a notice in accordance
with Section 2.10 of the Purchase Agreement indicating such Upgrade and
identifying the Upgrade Receivable and the Pre-Upgrade Receivable.
(d) There shall be no limit on the number of Receivables related to Upgrade
Contracts substituted for under this Agreement.
Section 1.6 Payments and Computations, Etc. All amounts to be paid or
deposited by Buyer hereunder shall be paid or deposited in accordance with the
terms of the Agreement on the day when due in immediately available funds to the
account of Originator designated from time to time by Originator or as otherwise
directed by Originator. In the event that any payment owed by any Person
hereunder becomes due on a day that is not a Business Day, then such payment
shall be made on the next succeeding Business Day. If any Person fails to pay
any amount hereunder when due, such Person agrees to pay, on demand, the Default
Fee in respect thereof until paid in full; provided, however, that such Default
Fee shall not at any time exceed the maximum rate permitted by applicable law.
All c Payments and Computations, Etc. All omputations of interest payable
hereunder shall be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed.
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Section 1.7 Transfer of Records.
(a) In connection with the Purchases of Receivables hereunder, Originator
hereby sells, transfers, assigns and otherwise conveys to Buyer all of
Originator's right and title to and interest in the Records relating to all
Receivables sold hereunder. There will be no need for any further documentation
in connection with any Purchase, other than documents specifically required by
this Agreement. In connection with such transfer, Originator hereby grants to
each of Buyer, the Agent and the Servicer an irrevocable, non-exclusive license
to use, without royalty or payment of any kind, all software used by Originator
to account for the Receivables, to the extent necessary to administer the
Receivables, whether such software is owned by Originator or is owned by others
and used by Originator under license agreements with respect thereto, provided
that should the consent of any licensor of Originator to such grant of the
license described herein be required, Originator hereby agrees that upon the
request of Buyer (or the Agent as Buyer's assignee), Originator will use its
reasonable efforts to obtain the consent of such third-party licensor. The
license granted hereby shall be irrevocable, and shall terminate on the date
this Agreement terminates in accordance with its terms.
(b) Originator (i) shall take such action requested by Buyer and/or the
Agent (as Buyer's assignee), from time to time hereafter, that May be necessary
or appropriate to ensure that Buyer and its assigns under the Purchase Agreement
have an enforceable ownership interest in the Records relating to the
Receivables purchased from Originator hereunder, and (ii) shall use its
reasonable efforts to ensure that Buyer, the Agent and the Servicer each has an
enforceable right (whether by license or sublicense or otherwise) to use all of
the computer software used to account for the Receivables and/or to recreate
such Records.
Section 1.8 Characterization. If, notwithstanding the intention of the
parties expressed in Section 1.1(c), any sale or contribution by Originator to
Buyer of Receivables hereunder shall be characterized as a secured loan and not
a sale, then this Agreement shall be deemed to constitute a security agreement
under the UCC and other applicable law. For this purpose and without being in
derogation of the parties' intention that each sale of Receivables hereunder
shall constitute a true sale thereof, Originator hereby grants to Buyer a duly
perfected security interest in all of Originator's right, title and interest in,
to and under all Receivables now existing and hereafter arising, all Collections
and Related Security with respect thereto, each Collection Account and all
proceeds of the foregoing, which security interest shall be prior to all other
Adverse Claims thereto. After the occurrence of an Amortization Event, Buyer and
its assigns shall have, in addition to the rights and remedies which they May
have under this Agreement, all other rights and remedies provided to a secured
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creditor after default under the UCC and other applicable law, which rights and
remedies shall be cumulative.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Originator. Originator hereby
represents and warrants to Buyer, as to itself and as to WorldMark (to the
extent specific reference to WorldMark is made) that:
(a) Corporate Existence and Power. Originator is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and is duly qualified to do business and is in good standing as a
foreign corporation, and has and holds all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is conducted, except where
failure to so qualify or so hold could not be reasonably expected to have a
Material Adverse Effect.
(b) Power and Authority; Due Authorization Execution and Delivery. The
execution and delivery by Originator of this Agreement and each other
Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder and, Originator's use of the proceeds of
Purchases made hereunder, are within its corporate powers and authority and have
been duly authorized by all necessary corporate action on its part. This
Agreement and each other Transaction Document to which Originator is a party has
been duly executed and delivered by Originator.
(c) No Conflict. The execution and delivery by Originator of this Agreement
and each other Transaction Document to which it is a party, and the performance
of its obligations hereunder and thereunder do not contravene or violate (i) its
certificate or articles of incorporation or by-laws (or equivalent
organizational documents), (ii) any law, Rule or regulation applicable to it,
(iii) any restrictions under any agreement, contract or instrument to which it
is a party or by which it or any of its property is bound, or (iv) any order,
writ, judgment, award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any Adverse Claim
on assets of Originator or its Subsidiaries (except as created hereunder) and no
transaction contemplated hereby requires compliance with any bulk sales act or
similar law.
(d) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action by,
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and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution and delivery by Originator of this Agreement
and each other Transaction Document to which it is a party and the performance
of its obligations hereunder and thereunder.
(e) Actions, Suits.
(i) There are no actions, suits or proceedings pending, or to the
best of Originator's knowledge, threatened, against or affecting
Originator, or any of its or WorldMark's properties, in or before any
court that could be reasonably expected to have a Material Adverse
Effect.
(ii) Originator is not in default with respect to any order of
any court, arbitrator or governmental body.
(f) Binding Effect. This Agreement and each other Transaction Document to
which Originator is a party constitute the legal, valid and binding obligations
of Originator enforceable against Originator in accordance with their respective
terms, except as such enforcement May be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(g) Accuracy of Information. All information heretofore furnished by
Originator or any of its Affiliates to Buyer (or its assigns) for purposes of or
in connection with this Agreement, any of the other Transaction Documents or any
transaction contemplated hereby or thereby is, and all such information
hereafter furnished by Originator or any of its Affiliates to Buyer (or its
assigns) will be, true and accurate in every material respect on the date such
information is stated or certified and does not and will not contain any
material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(h) Use of Proceeds. No proceeds of any Purchase hereunder will be used (i)
for a purpose that violates, or would be inconsistent with, Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to
time or (ii) to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Good Title. Immediately prior to each Purchase hereunder, Originator
shall be the legal and beneficial owner of the Receivables and Related Security
with respect thereto, free and clear of any Adverse Claim, except as created by
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the Transaction Documents. There have been duly filed all financing statements
or other similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect Originator's
ownership interest in each Receivable, its Collections and the Related Security.
(j) Perfection. This Agreement, together with the filing of the financing
statements contemplated hereby, is effective to, and shall, upon each Purchase
hereunder, transfer to Buyer (and Buyer shall acquire from Originator) legal and
equitable title to, with the right to sell and encumber each Receivable existing
and hereafter arising, together with the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, except as created by the
Transaction Documents. There have been duly filed all financing statements or
other similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect Buyer's ownership
interest in the Receivables, the Related Security and the Collections.
(k) Places of Business. The principal places of business and chief
executive office of Originator and the offices where it keeps all of its Records
are located at the address(es) listed on Exhibit II or such other locations of
which Buyer has been notified in accordance with Section 4.2(a) in jurisdictions
where all action required by Section 4.2(a) has been taken and completed.
Originator's Federal Employer Identification Number is correctly set forth on
Exhibit II.
(l) Collections. The conditions and requirements set forth in Section
4.1(l) have at all times been satisfied and duly performed. The name and address
of the bank with which the Clearing Account is established, together with the
account numbers of the Clearing Account and the Collection Account, are listed
on Exhibit III.
(m) Material Adverse Effect. Since June 30, 1999 no event has occurred that
would have a Material Adverse Effect, including a Material Adverse Effect
regarding the collectibility of the Receivables.
(n) Names. In the past five (5) years, Originator has not used any
corporate names, trade names or assumed names other than the name in which it
has executed this Agreement.
(o) Ownership of Buyer Originator owns, directly or indirectly, 100% of the
issued and outstanding capital stock of Buyer, free and clear of any Adverse
Claim. Such capital stock is validly issued, fully paid and nonassessable, and
there are no options, warrants or other rights to acquire securities of Buyer.
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(p) Not a Holding Company or an Investment Company. Originator is not a
"holding company" or a "subsidiary holding company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or any successor statute. Originator is not an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute.
(q) Compliance with Law. Originator has complied in all respects with all
applicable laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it May be subject. Each Receivable, together with the
Contract related thereto, does not contravene any laws, rules or regulations
applicable thereto (including laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal credit opportunity,
fair debt collection practices and privacy), and no part of such Contract is in
violation of any such law, Rule or regulation.
(r) Compliance with Credit and Collection Policy. Originator has complied
in all material respects with the Credit and Collection Policy with regard to
each Receivable and the related Contract, and has not made any material change
to such Credit and Collection Policy, except such material change as to which
Buyer (or its assigns) has been notified in accordance with Section 4.1(a)(vii).
(s) Payments to Originator. With respect to each Receivable transferred to
Buyer hereunder, the Purchase Price received by Originator constitutes
reasonably equivalent value in consideration therefor, and such transfer was not
made for or on account of an antecedent debt. No transfer by Originator of any
Receivable hereunder is or May be voidable under any Section of the Bankruptcy
Reform Act of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended.
(t) Enforceability of Contracts. Each Contract with respect to each
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the related Obligor to pay the Outstanding Balance of the
Receivable created thereunder and all accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement May
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the Net Receivables
Balance was an Eligible Receivable on the date of its Purchase hereunder.
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(v) Year 2000. Originator (i) has reviewed the areas within its business
and operations which could be adversely affected by the Year 2000 Problem, (ii)
has developed a Year 2000 Plan to address the Year 2000 Problem on a timely
basis, (iii) is taking all actions necessary to meet the Schedule and goals of
the Year 2000 Plan and (iv) has established adequate reserves to implement the
Year 2000 Plan. Originator does not reasonably anticipate that the Year 2000
Problem could have a Material Adverse Effect.
(w) Accounting. The manner in which Originator accounts for the
transactions contemplated by this Agreement does not jeopardize the true sale
analysis.
(x) No Adverse Selection. Originator has not selected the Receivables to be
transferred hereunder from all eligible Originated Receivables based on criteria
which it believes would result in such transferred Receivables being of lesser
quality than the Originated Receivables not transferred hereunder.
(y) Title to Properties. WorldMark, directly or beneficially, owns good
record and marketable title in fee simple to, or valid leasehold interests in,
all real property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect.
(z) Liabilities of WorldMark. WorldMark:
(i) has not voluntarily incurred or at any time become
voluntarily liable for any Indebtedness;
(ii) has not voluntarily allowed its property to become subject
to any Liens, nor is any of its property subject to any Liens, other
than (a) utility or other easements or licenses unrelated to any debt
of WorldMark or (b) Liens that in do not exceed, in aggregate,
$100,000; and
(iii) has not involuntarily incurred and is not involuntarily
liable for any debt, nor is any of its property involuntarily subject
to any Liens (other than utility or similar easements or licenses
unrelated to any debt of 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.
(aa) Environmental Matters. The Originator has conducted its operations and
kept and maintained its property in compliance with all Environmental Laws. The
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Originator has performed its duties under its management agreement with
WorldMark in material compliance with all Environmental Laws.
(bb) Conformity of Receivable Documents. The information set forth on each
Schedule of Receivables is accurate and is consistent with the terms of the
related Receivable Documents delivered to the Custodian.
(cc) No Subsidiaries of WorldMark. WorldMark has no Subsidiaries.
(dd) Insurance. Originator in its individual capacity and as property
manager for WorldMark maintains in effect, or causes to be maintained in effect,
such property, casualty and liability insurance covering its and WorldMark's
real property and personal property as Originator deems appropriate in its good
faith business judgement.
(ee) Compliance with Representations. On and as of the date of each
Purchase Date hereunder, Originator hereby represents and warrants that all of
the other representations and warranties set forth in this Article II are true
and correct on and as of the date of such Purchase (and after giving effect to
such Purchase) as though made on and as of each such Purchase Date.
ARTICLE III
CONDITIONS OF PURCHASES
Section 3.1 Conditions Precedent to Initial Purchase. The initial Purchase
under this Agreement is subject to the conditions precedent that () Buyer shall
have received on or before the applicable Purchase Date those documents listed
on Schedule A and () all of the conditions to the initial purchase under the
Purchase Agreement shall have been satisfied or waived in accordance with the
terms thereof.
Section 3.2 Conditions Precedent to All Purchases. Each Purchase shall be
subject to the further conditions precedent that:
(a) the Facility Termination Date shall not have occurred;
(b) Buyer (or its assigns) shall have received such other approvals,
opinions or documents as it May reasonably request;
(c) no Amortization Event or Potential Amortization Event shall have
occurred.
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As a further condition to each Purchase, on the applicable Purchase Date,
Originator represents and warrants that the representations and warranties set
forth in Article II are true and correct on and as of such Purchase Date (and
after giving effect thereto) as though made on and as of such date.
ARTICLE IV
COVENANTS
Section 4.1 Affirmative Covenants of Originator. Until the date on which
this Agreement terminates in accordance with its terms, Originator hereby
covenants as set forth below:
(a) Financial Reporting. Originator will maintain for itself and its
Subsidiaries a system of accounting established and administered in accordance
with GAAP, and furnish to Buyer (or its assigns):
(i) Annual Reporting. Such annual financial reports as required
by Section 7.1(a)(i) of the Purchase Agreement.
(ii) Quarterly Reporting. Such quarterly financial reports as
required by Section 7.1(a)(ii) of the Purchase Agreement.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate in
substantially the form of Exhibit IV signed by an Authorized Officer
of Originator and dated the date of such annual financial statement or
such quarterly financial statement, as the case May be.
(iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of Originator or its
Affiliates, copies of all financial statements, reports and proxy
statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, copies of
all registration statements and annual, quarterly, monthly or other
regular reports which Originator or its Affiliates or any of their
Subsidiaries May from time to time file with the Securities and
Exchange Commission.
(vi) Copies of Notices. Promptly upon its receipt of any notice,
request for consent, financial statements, certification, report or
other communication under or in connection with any Transaction
Document from any Person other than Buyer, the Agent or Conduit,
copies of the same.
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(vii) Change in Credit and Collection Policy. At least thirty
(30) days prior to the effectiveness of any material change in or
amendment to the Credit and Collection Policy, a copy of the Credit
and Collection Policy then in effect and a notice indicating such
change or amendment.
(viii) Other Information. Promptly, from time to time, such other
information, documents, records or reports relating to the Receivables
or the condition or operations, financial or otherwise, of Originator
and WorldMark as Buyer (or its assigns) May from time to time
reasonably request in order to protect the interests of Buyer (and its
assigns) under or as contemplated by this Agreement.
(b) Notices. Originator will notify the Buyer (or its assigns) in writing
of any of the following promptly upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken with respect
thereto:
(i) Amortization Events or Potential Amortization Events. The
occurrence of each Amortization Event and each Potential Amortization
Event, as set forth in Article V of this Agreement, by a statement of
an Authorized Officer of Originator.
(ii) Judgment and Proceedings.
(A) The entry of any judgment or decree against WorldMark,
the Originator or any of the Originator's Subsidiaries if the
aggregate amount of all judgments and decrees then outstanding against
WorldMark, the Originator or the Originator's Subsidiaries exceeds
$1,000,000.
(B) The institution of any material litigation, arbitration
proceeding or governmental proceeding against WorldMark, the
Originator or the Originator's Subsidiaries.
(iii) Material Adverse Effect. The occurrence of any event or
condition that has, or could reasonably be expected to have, a
Material Adverse Effect, including a Material Adverse Effect on the
collectibility of the Receivables.
(iv) Defaults Under Other Agreements. The occurrence of a default
or an event of default under any other material financing arrangement
pursuant to which Originator is a debtor or an obligor.
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(v) Downgrade of the Originator. Any downgrade in the rating of
any Indebtedness or asset backed security of the Originator, or any of
its Subsidiaries or Affiliates, as applicable or as May become
applicable, by any nationally recognized rating agency, setting forth
the Indebtedness or asset backed security affected and the nature of
such change.
(vi) Default by Custodian. The occurrence of a default or event
of default under Article XV of the Purchase Agreement or any other
provision of the Purchase Agreement by the Custodian.
(c) Compliance with Laws and Preservation of Corporate Existence.
Originator will comply in all material respects with all applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
they May be subject. Originator will preserve and maintain its corporate
existence, rights, franchises and privileges in the jurisdiction of their
incorporation, and qualify and remain qualified in good standing as foreign
corporations in each jurisdiction where their businesses are conducted.
(d) Audits. Originator will furnish and will cause WorldMark to furnish to
Buyer (or its assigns) from time to time such information with respect to it and
the Receivables as Buyer (or its assigns) May reasonably request. Originator and
WorldMark will, from time to time during regular business hours as requested by
Buyer (or its assigns), upon reasonable notice, permit Buyer (or its assigns) or
their respective agents or representatives, (i) to examine and make copies of
and abstracts from all Records in the possession or under the control of
Originator relating to the Receivables and the Related Security, including the
related Contracts, and (ii) to visit the offices and properties of Originator
for the purpose of examining such materials described in clause (i) above, and
to discuss matters relating to Originator's and WorldMark's financial condition
or the Receivables and the Related Security or Originator's performance under
any of the Transaction Documents or Originator's performance under the Contracts
and, in each case, with any of the officers or employees of Originator having
knowledge of such matters. The cost of audits conducted pursuant to this Section
4.1 (d) will be borne solely by the Originator.
(e) Keeping and Marking of Records and Books.
(i) Originator will maintain and implement administrative and
operating procedures (including an ability to recreate records
evidencing Receivables in the event of the destruction of the
originals thereof), and keep and maintain (or will cause the Custodian
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to keep and maintain) all documents, books, records and other
information reasonably necessary or advisable for the collection of
all Receivables (including records adequate to permit the immediate
identification of each new Receivable and all Collections of and
adjustments to each existing Receivable). Originator will give Buyer
(or its assigns) notice of any material change in the administrative
and operating procedures referred to in the previous sentence.
(ii) Originator will (a) on or prior to the date hereof, mark its
master data processing records and other books and records relating to
the Receivables with a legend, acceptable to Buyer (or its assigns),
describing Buyer's ownership interests in the Receivables and further
describing the Purchaser Interests of the Agent (on behalf of the
Purchasers) under the Purchase Agreement and (b) upon the request of
Buyer (or its assigns), (x) mark each Contract with a legend
describing Buyer's ownership interests in the Receivables and further
describing the Purchaser Interests of the Agent (on behalf of the
Purchasers) and (y) deliver to the Custodian all Receivable Documents
(including all multiple originals of any such Contract) relating to
the Receivables.
(f) Compliance with Contracts and Credit and Collection Policy. Originator
will timely and fully (i) perform and comply with all provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables, and (ii) comply in all respects with the Credit and Collection
Policy in regard to each Receivable and the related Contract. Originator will
pay when due any taxes payable in connection with the Receivables, exclusive of
taxes on or measured by income or gross receipts of Buyer and its assigns.
(g) Ownership. Originator will take all necessary action to establish and
maintain, irrevocably in Buyer, legal and equitable title to the Receivables,
the Related Security and the Collections, free and clear of any Adverse Claims
other than Adverse Claims in favor of Buyer (and its assigns) (including the
filing of all financing statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all appropriate jurisdictions
to perfect Buyer's interest in such Receivables, Related Security and
Collections and such other action to perfect, protect or more fully evidence the
interest of Buyer as Buyer (or its assigns) May reasonably request).
(h) Purchasers' Reliance. Originator acknowledges that the Agent and the
Purchasers are entering into the transactions contemplated by the Purchase
Agreement in reliance upon Buyer's identity as a legal entity that is separate
from Originator and any Affiliates thereof. Therefore, from and after the date
of execution and delivery of this Agreement, Originator will take all reasonable
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steps including all steps that Buyer or any assignee of Buyer May from time to
time reasonably request to maintain Buyer's identity as a separate legal entity
and to make it manifest to third parties that Buyer is an entity with assets and
liabilities distinct from those of Originator and any Affiliates thereof and not
just a division of Originator. Without limiting the generality of the foregoing
and in addition to the other covenants set forth herein, Originator (i) will not
hold itself out to third parties as liable for the debts of Buyer nor purport to
own the Receivables and other assets acquired by Buyer, (ii) will take all other
actions necessary on its part to ensure that Buyer is at all times in compliance
with the covenants set forth in Section 7.1(i) of the Purchase Agreement and
(iii) will cause all tax liabilities arising in connection with the transactions
contemplated herein or otherwise to be allocated between Originator and Buyer on
an arm's-length basis and in a manner consistent with the procedures set forth
in U.S. Treasury Regulations ss.ss.1.1502-33(d) and 1.1552-1.
(i) Taxes. Originator will file all tax returns and reports required by law
to be filed by it and promptly pay all taxes and governmental charges at any
time owing
(j) Insurance. Originator will maintain in effect, or cause to be
maintained in effect, at Originator's own expense, such property, casualty and
liability insurance covering its real property and personal property as
Originator deems appropriate in its good faith business judgement. The foregoing
requirements shall not be construed to negate, reduce or modify, and are in
addition to, Originator's obligations hereunder.
(k) Environmental Laws. TWRI shall, and shall cause each of its
Subsidiaries to conduct its operations and keep and maintain its property in
compliance with all Environmental Laws. TWRI shall perform its duties under its
management agreement with WorldMark in compliance with all Environmental Laws.
(l) Collections. Originator shall cause each Obligor to remit his or her
payments to a clearing account (the "Clearing Account") established at Commerce
Bank of Washington or another bank acceptable to the Agent in its sole
discretion. The Originator shall cause any payments made by Automatic Debit
Collection to be deposited directly into the Clearing Account from each
Obligor's relevant account. In the event any payments relating to Receivables
are remitted directly to Originator or any Affiliate of Originator, Originator
will remit (or will cause all such payments to be remitted) directly to the bank
where the Clearing Account is then established for deposit into the Clearing
Account within two (2) Business Days following receipt thereof and, at all times
prior to such remittance, Originator will itself hold or, if applicable, will
cause such payments to be held in trust for the exclusive benefit of Buyer and
its assigns.
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Section 4.2 Negative Covenants of Originator. Until the date on which this
Agreement terminates in accordance with its terms, Originator hereby covenants
that:
(a) Name Change, Offices and Records. Originator will not change its name,
identity or corporate structure (within the meaning of Section 9-402(7) of any
applicable enactment of the UCC) or relocate its chief executive office or any
office where Records are kept unless it shall have: (i) given Buyer (or its
assigns) at least forty-five (45) days' prior written notice thereof and (ii)
delivered to Buyer (or its assigns) all financing statements, instruments and
other documents requested by Buyer (or its assigns) in connection with such
change or relocation.
(b) Change in Payment Instructions to Obligors. Originator will not add or
terminate any Clearing Account agreement or make any change in the instructions
to Obligors regarding payments to be made to any Clearing Account, or amend or
supplement any agreement with the Custodian or grant any waiver of performance
thereunder, unless Buyer (or its assigns) shall have received, at least ten (10)
days before the proposed effective date therefor, (i) written notice of such
addition, termination or change and (ii) with respect to the addition of a
Clearing Account, an executed Clearing Account agreement with respect to the new
Clearing Account.
(c) Modifications to Contracts and Credit and Collection Policy. Originator
will not make any change to the Credit and Collection Policy that could
adversely affect the collectibility of the Receivables or decrease the credit
quality of any newly created Receivables. Except as otherwise permitted in its
capacity as Servicer pursuant to Section 8.2(d) of the Purchase Agreement,
Originator will not extend, amend or otherwise modify the terms of any
Receivable or any Contract related thereto other than in accordance with the
Credit and Collection Policy.
(d) Sales, Liens. Originator will not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to, or
create or suffer to exist any Adverse Claim upon (including the filing of any
financing statement) or with respect to, any Receivable, Related Security or
Collections, or upon or with respect to any Contract under which any Receivable
arises, or any Collection Account, or assign any right to receive income with
respect thereto (other than, in each case, the creation of the interests therein
in favor of Buyer provided for herein), and Originator will defend the right,
title and interest of Buyer in, to and under any of the foregoing property,
against all claims of third parties claiming through or under Originator.
However, no part of this Section 4.2(d) shall be construed as prohibiting an
assignment pursuant to Section 13.1 or Section 2.1 of the Purchase Agreement.
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(e) No Adverse Selection. Originator shall not select the Receivables to be
transferred hereunder from all eligible Originated Receivables based on criteria
which it believes would result in such transferred Receivables being of lesser
quality than the Originated Receivables not transferred hereunder.
(f) Accounting for Purchases. Originator will not, and will not permit any
Affiliate to, account for or treat (whether in financial statements or
otherwise) the transactions contemplated hereby in any manner other than the
sale of the Receivables and the Related Security by Originator to Buyer or in
any other respect account for or treat the transactions contemplated hereby in
any manner other than as a sale of the Receivables and the Related Security by
Originator to Buyer except to the extent that such transactions are not
recognized on account of consolidated financial reporting in accordance with
GAAP.
ARTICLE V
AMORTIZATION EVENTS
Section 5.1 Amortization Events. The occurrence of any one or more of the
following events shall constitute an Amortization Event:
(a) Originator shall fail (i) to make any payment or deposit required
hereunder when due, or (ii) to perform or observe any term, covenant or
agreement hereunder (other than as referred to in clause (i) of this paragraph
(a)) or any other Transaction Document to which it is a party and such failure
in the case of this clause (ii) shall continue for three (3) consecutive
Business Days.
(b) Any representation, warranty, certification or statement made by
Originator in this Agreement, any other Transaction Document or in any other
document delivered pursuant hereto or thereto shall prove to have been incorrect
when made or deemed made, and the effects of such have not been cured within
three business days after the date the representation, warranty, certification
or statement was discovered, or should have been discovered, not to have been
correct.
(c) Failure of World Mark to pay any Indebtedness when due or of Originator
to pay any Indebtedness greater than $1,000,000 when due; or the default by
Originator in the performance of any term, provision or condition contained in
any agreement under which any such Indebtedness greater than $1,000,000 was
created or is governed, the effect of which is to cause, or to permit the holder
or holders of such Indebtedness to cause, such Indebtedness to become due prior
to its stated maturity; or any such Indebtedness of Originator shall be declared
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to be due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the date of maturity thereof.
(d) (i) Originator or any of its Subsidiaries shall generally not pay its
debts as such debts become due or shall admit in writing its inability to pay
its debts generally or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against Originator or any
of its Subsidiaries seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee or other similar
official for it or any substantial part of its property or (ii) Originator or
any of its Subsidiaries shall take any corporate action to authorize any of the
actions set forth in clause (i) above in this subsection (d).
(e) A date shall occur which is the 90th day following the earlier to occur
of (i) a public announcement of a Change of Control and (ii) a Change of
Control.
(f) One or more final judgments for the payment of money shall be entered
against Originator on claims not covered by insurance or as to which the
insurance carrier has denied its responsibility, and such judgment shall
continue unsatisfied and in effect for fifteen (15) consecutive days without a
stay of execution.
(g) WorldMark:
(i) voluntarily incurs or at any time become voluntarily liable
for any Indebtedness;
(ii) voluntarily allows its property to become subject to any
Liens, or subjects any of its property to any Liens, other than (a)
utility or other easements or licenses unrelated to any debt of
WorldMark or (b) Liens that in do not exceed, in aggregate, $100,000;
or
(iii) involuntarily incurs or becomes involuntarily liable for
any debt, or subjects any of its property involuntarily to any Liens
(other than utility or similar easements or licenses unrelated to any
debt of 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.
Section 5.2 Remedies. Upon the occurrence and during the continuation of an
Amortization Event, Buyer May take any of the following actions: (i) declare the
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Amortization Date to have occurred, whereupon the Amortization Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by Originator; provided, however, that upon
the occurrence of an Amortization Event described in Section 5.1(d), or of an
actual or deemed entry of an order for relief with respect to Originator under
the Federal Bankruptcy Code, the Amortization Date shall automatically occur,
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by Originator and (ii) to the fullest extent permitted by
applicable law, declare that the Default Fee shall accrue with respect to any
amounts then due and owing by Buyer to Originator. The aforementioned rights and
remedies shall be in addition to all other rights and remedies of Buyer and its
assigns available under this Agreement, by operation of law, at equity or
otherwise, all of which are hereby expressly preserved, including all rights and
remedies provided under the UCC, all of which rights shall be cumulative.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnities by Originator. Without limiting any other rights
that Buyer May have hereunder or under applicable law, Originator hereby agrees
to indemnify Buyer and its assigns, officers, directors, agents and employees
(each an "Indemnified Party") from and against any and all damages, losses,
claims, taxes, liabilities, costs, expenses and for all other amounts payable,
including reasonable attorneys' fees (which attorneys May be employees of Buyer)
and disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them arising out of
or as a result of this Agreement or the acquisition, either directly or
indirectly, by Buyer of an interest in the Receivables, excluding, however:
(a) Indemnified Amounts to the extent a final judgment of a court of
competent jurisdiction holds that such Indemnified Amounts resulted from gross
negligence or willful misconduct on the part of the Indemnified Party seeking
indemnification;
(b) Indemnified Amounts to the extent the same includes losses in respect
of Receivables that are uncollectible on account of the insolvency, bankruptcy
or lack of creditworthiness of the related Obligor; or
(c) taxes imposed by the jurisdiction in which such Indemnified Party's
principal executive office is located, on or measured by the overall net income
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of such Indemnified Party to the extent that the computation of such taxes is
consistent with the Intended Characterization;
provided, however, that nothing contained in this sentence shall limit the
liability of Originator or limit the recourse of Buyer to Originator for amounts
otherwise specifically provided to be paid by Originator under the terms of this
Agreement. Without limiting the generality of the foregoing indemnification,
Originator shall indemnify Buyer for Indemnified Amounts (including losses in
respect of uncollectible receivables, regardless of whether reimbursement
therefor would constitute recourse to Originator) relating to or resulting from:
(i) any representation or warranty made by Originator or
Custodian (or any officers of Originator, WorldMark or Custodian)
under or in connection with this Agreement, any other Transaction
Document or any other information or report delivered by Originator
pursuant hereto or thereto, which shall have been false or incorrect
when made or deemed made;
(ii) the failure by Originator , WorldMark or Custodian (with
respect to its duties under Article XV of the Purchase Agreement or
any other provision of the Purchase Agreement) to comply with any
applicable law, Rule or regulation with respect to any Receivable or
Contract related thereto, or the nonconformity of any Receivable or
Contract included therein with any such applicable law, Rule or
regulation or any failure of Originator, WorldMark or Custodian (with
respect to its duties under Article XV of the Purchase Agreement or
any other provision of the Purchase Agreement) to keep or perform any
of their respective obligations, express or implied, with respect to
any Contract;
(iii) any failure of Originator or Custodian to perform its
duties, covenants or other obligations in accordance with the
provisions of this Agreement or any other Transaction Document;
(iv) any lawsuit or legal claim arising out of or in connection
with the Resorts and Units, any defect in WorldMark's ownership of
title to, or leasehold rights in, the real property used in its
business, any Obligor's right to use the Resorts and Units, or any
rights or services that are the subject of any Contract;
(v) any products liability or similar claim arising out of or in
connection with rights or services that are the subject of any
Contract;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
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Receivable (including a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the service or rights
related to such Receivable or the furnishing or failure to provide for
such rights or furnish such services;
(vii) the commingling of Collections of Receivables at any time
with other funds;
(viii) any investigation, litigation or proceeding related to or
arising from this Agreement or any other Transaction Document, the
transactions contemplated hereby, the use of the proceeds of a
Purchase, the ownership of the Receivables or any other investigation,
litigation or proceeding relating to Originator, WorldMark or
Custodian in which any Indemnified Party becomes involved as a result
of any of the transactions contemplated hereby;
(ix) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor being immune
from civil and commercial law and suit on the grounds of sovereignty
or otherwise from any legal action, suit or proceeding;
(x) any Amortization Event described in Section 5.1(d);
(xi) any failure to vest and maintain vested in Buyer, or to
transfer to Buyer, legal and equitable title to, and ownership of, the
Receivables, the Related Security (and the Collections, free and clear
of any Adverse Claim;
(xii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivable, the Related Security and Collections with
respect thereto, and the proceeds of any thereof, whether at the time
of any Purchase or at any subsequent time;
(xiii) any action or omission by Originator, WorldMark or
Custodian which reduces or impairs the rights of Buyer with respect to
any Receivable or the value of any such Receivable;
(xiv) any attempt by any Person to void any Purchase hereunder
under statutory provisions or common law or equitable action; and
(xv) the Year 2000 Problem with respect to the Originator.
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Any Indemnified Amounts incurred by actions of the Custodian shall be payable by
the Custodian to the Buyer no later than the 30th day after a demand for payment
of the Buyer is delivered to the Custodian. Any such Indemnified Amounts not
paid by such date shall be immediately payable by the Originator to the Buyer.
Section 6.2 Other Costs and Expenses. Originator shall pay to Buyer on
demand all costs and out-of-pocket expenses in connection with the preparation,
execution, delivery and administration of this Agreement, the transactions
contemplated hereby and the other documents to be delivered hereunder.
Originator shall pay to Buyer on demand any and all costs and expenses of Buyer,
if any, including reasonable counsel fees and expenses in connection with the
enforcement of this Agreement and the other documents delivered hereunder and in
connection with any restructuring or workout of this Agreement or such
documents, or the administration of this Agreement following an Amortization
Event.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Waivers and Amendments.
(a) No failure or delay on the part of Buyer (or its assigns) in exercising
any power, right or remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or
remedy preclude any other further exercise thereof or the exercise of any other
power, right or remedy. The rights and remedies herein provided shall be
cumulative and nonexclusive of any rights or remedies provided by law. Any
waiver of this Agreement shall be effective only in the specific instance and
for the specific purpose for which given.
(b) No provision of this Agreement May be amended, supplemented, modified
or waived except in writing signed by Originator and Buyer and, to the extent
required under the Purchase Agreement, the Agent, the Conduit, and the Financial
Institutions or the Required Financial Institutions.
Section 7.2 Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other parties hereto at their respective addresses or telecopy
numbers set forth on the signature pages hereof or at such other address or
telecopy number as such Person May hereafter specify for the purpose of notice
to each of the other parties hereto. Each such notice or other communication
shall be effective () if given by telecopy, upon the receipt thereof, () if
given by mail, at the time such communication is received via first class mail
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or () if given by any other means, when received at the address specified in
this Section 7.2.
Section 7.3 Protection of Ownership Interests of Buyer.
(a) Originator agrees that from time to time, at its expense, it will
promptly execute and deliver all instruments and documents, and take all
actions, that May be necessary or desirable, or that Buyer (or its assigns) May
reasonably request, to perfect, protect or more fully evidence the Purchaser
Interests, or to enable Buyer (or its assigns) to exercise and enforce their
rights and remedies hereunder. At any time after the occurrence or during the
continuation of an Amortization Event, Buyer (or its assigns) may, at
Originator's sole cost and expense, direct Originator to notify the Obligors of
Receivables of the ownership interests of Buyer under this Agreement and May
also direct that payments of all amounts due or that become due under any or all
Receivables be made directly to Buyer or its designee.
(b) If Originator or Custodian fails to perform any of its obligations
hereunder or under any other Transaction Document, Buyer (or its assigns) May
(but shall not be required to) perform, or cause performance of, such
obligation, and Buyer's (or such assigns') costs and expenses incurred in
connection therewith shall be payable by Originator as provided in Section 6.2.
Originator irrevocably authorizes Buyer (and its assigns) at any time and from
time to time in the sole discretion of Buyer (or its assigns), and appoints
Buyer (and its assigns) as its attorney(es)-in-fact, to act on behalf of
Originator (i) to execute on behalf of Originator as debtor and to file
financing statements necessary or desirable in Buyer's (or its assigns') sole
discretion to perfect and to maintain the perfection and priority of the
interest of Buyer in the Receivables and (ii) to file a carbon, photographic or
other reproduction of this Agreement or any financing statement with respect to
the Receivables as a financing statement in such offices as Buyer (or its
assigns) in their sole discretion deem necessary or desirable to perfect and to
maintain the perfection and priority of Buyer's interests in the Receivables.
This appointment is coupled with an interest and is irrevocable.
(c) If, at any time following an Amortization Event, in connection with the
sale, liquidation or disposition by the Agent, any Purchaser or any Servicer of
any Receivables, Vacation Credits or other Related Security, it is necessary to
obtain any license or to register or qualify any such Person or any such
collateral under any applicable law or regulation, Originator shall, at its
expense, take all actions that May be necessary or desirable, or that the Agent
May reasonably request, to assist in any such licensing, registration or
qualification, and the Originator shall reimburse the Agent, each Purchaser and
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any such Servicer (other than Trendwest or any Affiliate thereof) for any fees,
costs or expenses incurred thereby.
Section 7.4 Confidentiality.
(a) Originator shall maintain and shall cause each of its employees and
officers to maintain the confidentiality of this Agreement and the other
confidential proprietary information with respect to the Agent and Conduit and
their respective businesses obtained by it or them in connection with the
structuring, negotiating and execution of the transactions contemplated herein,
except that Originator and its officers and employees May disclose such
information to Originator's external accountants and attorneys and as required
by any applicable law or order of any judicial or administrative proceeding.
(b) Anything herein to the contrary notwithstanding, Originator hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to Buyer, the Agent, the Financial Institutions or Conduit by each other, (ii)
by Buyer, the Agent or the Purchasers to any prospective or actual assignee or
participant of any of them or (iii) by the Agent to any rating agency,
Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to Conduit or any entity organized for the purpose of purchasing, or
making loans secured by, financial assets for which Bank One acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing. In addition, the Purchasers
and the Agent May disclose any such nonpublic information pursuant to any law,
rule, regulation, direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or effect
of law).
Section 7.5 Bankruptcy Petition. Originator hereby covenants and agrees
that, prior to the date that is one year and one day after the payment in full
of all outstanding senior Indebtedness of Conduit, it will not institute
against, or join any other Person in instituting against, Conduit any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any state of
the United States.
Section 7.6 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ILLINOIS.
Section 7.7 CONSENT TO JURISDICTION. ORIGINATOR HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
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COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO
THIS AGREEMENT AND ORIGINATOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS AGAINST ORIGINATOR IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ORIGINATOR AGAINST BUYER (OR
ITS ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT
OR ANY DOCUMENT EXECUTED BY ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
Section 7.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY
ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER
OR THEREUNDER.
Section 7.9 Integration; Binding Effect; Survival of Terms.
(a) This Agreement, the Subordinated Note, and the Subscription Agreement
contain the final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof superseding all prior oral or written understandings.
(b) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns (including
any trustee in bankruptcy). 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 terminated in accordance with its
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terms; provided, however, that the rights and remedies with respect to (i) any
breach of any representation and warranty made by Originator pursuant to Article
II, (ii) the indemnification and payment provisions of Article VI, and Section
7.5 shall be continuing and shall survive any termination of this Agreement.
Section 7.10 Counterparts; Severability; Section References. This Agreement
May be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Unless otherwise expressly indicated, all references herein
to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and
sections of, and schedules and exhibits to, this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
TRENDWEST RESORTS, INC.
By:________________________________
Name:
Title:
Address: 9805 Willows Road
Redmond, WA 98052
TW HOLDINGS III, INC.
By:__________________________________
Name:
Title:
Address: 9805 Willows Road
Redmond, WA 98052
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EXHIBIT I
Definitions
This is Exhibit I to the Agreement (as hereinafter defined). As used in the
Agreement and the Exhibits, Schedules and Annexes thereto, capitalized terms
have the meanings set forth in this Exhibit I (such meanings to be equally
applicable to the singular and plural forms thereof). If a capitalized term is
used in the Agreement, or any Exhibit, Schedule or Annex thereto, and not
otherwise defined therein or in this Exhibit I, such term shall have the meaning
assigned thereto in Exhibit I to the Purchase Agreement.
"Accrued Balance" means, as to any Receivable, the Outstanding Balance of
such Receivable plus any accrued and unpaid interest thereon.
"Agent" has the meaning set forth in the Preliminary Statements to the
Agreement.
"Agreement" means the Receivables Sale Agreement, dated as of January 7,
2000, between Originator and Buyer, as the same May be amended, restated or
otherwise modified.
"Amortization Date" means the earliest to occur of (i) the Facility
Termination Date, (ii) any Business Day so designated by Originator or Buyer,
and (ii) the Business Day immediately prior to the occurrence of an Amortization
Event set forth in Section 5.1(d), (iii) the Business Day specified in a written
notice from Buyer to Originator following the occurrence of any other
Amortization Event, and (iv) the date which is 30 Business Days after Buyer's
receipt of written notice from Originator that it wishes to terminate the
Agreement.
"Amortization Event" has the meaning set forth in Section 5.1 of the
Agreement.
"Authorized Officer" means, with respect to Originator, its corporate
controller or chief financial officer or any other designated officer acceptable
to the Buyer.
"Bank One" means Bank One, NA (with its main office in Chicago, Illinois),
in its individual capacity, and its successors.
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"Business Day" means any day on which banks are not authorized or required
to close in New York, New York or Chicago, Illinois and The Depository Trust
Company of New York is open for business.
"Buyer" has the meaning set forth in the preamble to the Agreement.
"Calculation Period" means each calendar month or portion thereof which
elapses during the term of the Agreement. The first Calculation Period shall
commence on the date of the initial Purchase of Receivables hereunder and the
final Calculation Period shall terminate on the Amortization Date.
"Change of Control" means the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of
Originator.
"Charged-Off Receivable" means a Receivable: (i) as to which the Obligor
thereof has taken any action, or suffered any event to occur, of the type
described in Section 10.1(d) of the Purchase Agreement (as if references to
Originating Party therein refer to such Obligor; (ii) as to which the Obligor
thereof, if a natural person, is deceased; (iii) which, consistent with the
Credit and Collection Policy, would be written off TWRI's books as
uncollectible; (iv) which has been identified by Seller as uncollectible; or (v)
as to which any payment, or part thereof, remains unpaid for 179 days or more
from the original due date for such payment.
"Clearing Account" has the meaning set forth in Section 4.1(l) of this
Agreement.
"Collection Account" has the meaning set forth in Section 2.8(c) of the
Purchase Agreement.
"Conduit" has the meaning set forth in the Preliminary Statements to the
Agreement.
"Contract" means a Vacation Owner Agreement and any and all other
instruments, agreements, invoices, or other writings pursuant to which
indebtedness of an Obligor to Originator arises or which evidences such
indebtedness.
"Credit and Collection Policy" means Originator's credit and collection
policies and practices relating to Contracts and Receivables existing on the
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date hereof and summarized in Exhibit V, as modified from time to time in
accordance with the Agreement.
"Default Fee" means a per annum rate of interest equal to the sum of (i)
the Prime Rate, plus (ii) 2% per annum.
"Defaulted Receivable" means a Receivable on which payment of all or part
of the amount due remains unpaid for more than 90 and less than 179 days but
which is not a Charged-Off Receivable.
"Delinquent Receivable" means a Receivable as to which any payment, or part
thereof, remains unpaid for 31 or more days or more from the original due date
for such payment but which is not a Charged-Off Receivable.
"Dilutions" means, at any time, the aggregate amount of reductions or
cancellations described in Section 1.3(a) of the Agreement.
"Draft Schedule of Receivables" has the meaning set forth in Section 1.1.
"Eligible Receivable" means, at any time, an Originated Receivable:
(i) the Obligor of which (a) if a natural person, is a resident of the
United States or any Canadian province other than Quebec, (b) if a
corporation or other business organization, is organized under the laws of
the United States or any Canadian province other than Quebec or any
political subdivision thereof and has its chief executive office in the
United States or any Canadian province other than Quebec; (c) is not an
Affiliate of any of the parties hereto; and (d) is not a government or a
governmental subdivision or agency,
(ii) the Obligor of which is not the Obligor of any Delinquent
Receivable, Defaulted Receivable or Charged-Off Receivable,
(iii) which is not more than 30 days past due and which has never been
more than 30 days past due,
(iv) each payment (notwithstanding any payments made by the Obligor at
the time of entering into a Contract) under which by its terms is due and
payable within no more than 45 days of the original billing date therefor,
(v) which has not had its payment terms extended (other than in the
case of an Upgrade Contract),
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(vi) the remaining term of which is not greater than 84 months,
(vii) on which one due payment has been made by the Obligor and
received (other than in the case of an Upgrade Contract),
(viii) which is an "account," "chattel paper" or "general intangible"
within the meaning of Section 9-105 or Section 9-106, respectively, of the
UCC of all applicable jurisdictions,
(ix) which is denominated and payable only in United States dollars in
the United States,
(x) which arises under a Contract which is in substantially the form
of one of the form contracts set forth on Exhibit VIII hereto or which has
been otherwise approved by the Agent in writing, which, together with such
Receivable, is in full force and effect and constitutes the legal, valid
and binding obligation of the related Obligor enforceable against such
Obligor in accordance with its terms subject to no offset, counterclaim or
other defense,
(xi) which arises under a Contract which (a) does not require the
Obligor under such Contract to consent to the transfer, sale or assignment
of the rights and duties of the seller under such Contract and (b) does not
contain a confidentiality provision that purports to restrict the ability
of any Purchaser to exercise its rights under this Agreement, including its
right to review the Contract,
(xii) which arises under a Contract that contains an obligation to pay
a specified sum of money,
(xiii) which, together with the Contract related thereto, does not
contravene any law, Rule or regulation applicable thereto (including any
law, Rule and regulation relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no part of the Contract
related thereto is in violation of any such law, Rule or regulation,
(xiv) which satisfies all applicable requirements of the Credit and
Collection Policy,
(xv) which was generated in the ordinary course of Originator's
business,
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(xvi) which arises solely from the purchase of Vacation Credits by an
Obligor or from an Upgrade by an Obligor,
(xvii) as to which the Agent has not notified Buyer that the Agent has
determined that such Receivable or class of Receivables is not acceptable
as an Eligible Receivable, including because such Receivable arises under a
Contract that is not acceptable to the Agent,
(xviii) as to which, if such Receivable has been listed on a Schedule
of Exceptions delivered by the Custodian pursuant to Section 15.1(d) of
this Agreement, the Agent has consented in writing to the treatment of such
Receivable as an Eligible Receivable.
(xix) the Receivables File for which includes all related Receivable
Documents.
"Environmental Laws" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, in each case
relating to environmental, health, safety and land use matters.
"Facility Termination Date" means the earliest of (i) the occurrence of a
Amortization Event, (ii) 30 Business Days after the receipt of written
notification from Buyer to the Agent of Buyer's intention to terminate the
Liquidity Facility, and (iii) the Liquidity Termination Date.
"Federal Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as amended and any successor statute thereto.
"Financial Institutions" has the meaning set forth in the preamble to the
Purchase Agreement.
"GAAP" means generally accepted accounting principals as in effect from
time to time in the United States, consistently applied.
"Intended Characterization" means, for income tax purposes, the
characterization of the acquisition by the Purchasers of Purchaser Interests
under the Purchase Agreement as a loan or loans by the Purchasers to Buyer
secured by the Receivables, the Related Security and the Collections.
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"Liquidity Termination Date" means January 5, 2001.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition or operations of Originator and its Subsidiaries, (ii) the
ability of Originator to perform its obligations under the Agreement or any
other Transaction Document, (iii) the legality, validity or enforceability of
the Agreement or any other Transaction Document, (iv) Originator's, Buyer's, the
Agent's or any Purchaser's interest in the Receivables generally or in any
significant portion of the Receivables, the Related Security or Collections with
respect thereto, or (v) the collectibility of the Receivables generally or of
any material portion of the Receivables.
"Net Value" means, as of any date of determination, an amount equal to the
sum of (i) the aggregate Outstanding Balance of the Receivables at such time,
minus (ii) the sum of (a) the aggregate Capital outstanding at such time, plus
(b) the Aggregate Reserves.
"Net Worth" means as of the last Business Day of each Calculation Period
preceding any date of determination, the excess, if any, of (a) the aggregate
Outstanding Balance of the Receivables at such time, over (b) the sum of (i) the
aggregate Capital outstanding at such time, plus (ii) the aggregate outstanding
principal balance of the Subordinated Loans (including any Subordinated Loan
proposed to be made on the date of determination).
"Obligor" means a Person obliged to make payments pursuant to a Contract.
"Original Balance" means, with respect to any Receivable, the Outstanding
Balance of such Receivable on the date it was purchased by Buyer.
"Originated Receivable" means the indebtedness and other obligations owed
by an Obligor to Originator (without giving effect to any transfer or conveyance
under the Agreement) or Buyer (after giving effect to the transfers under the
Agreement) whether constituting an account, chattel paper, instrument or general
intangible, arising under a contract and includes the obligation to pay any
Finance Charges with respect thereto. Indebtedness and other rights and
obligations arising from any one transaction, including indebtedness and other
rights and obligations represented by an individual invoice, shall constitute a
Receivable separate from a Receivable consisting of the indebtedness and other
rights and obligations arising from any other transaction.
"Originator" has the meaning set forth in the preamble to the Agreement.
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"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Potential Amortization Event" means an event which, with the passage of
time or the giving of notice, or both, would constitute an Amortization Event.
"Pre-Upgrade Receivable" has the meaning set forth in Section 1.5 of this
Agreement.
"Prime Rate" means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.
"Purchase" means a purchase under the Agreement by Buyer from Originator of
Receivables, the Related Security and the Collections related thereto, together
with all related rights in connection therewith.
"Purchase Agreement" has the meaning set forth in the Preliminary
Statements to the Agreement.
"Purchase Date" means, as provided in Section 1.1(b) of the Agreement, any
Business Day selected by Originator on which a Purchase shall occur.
"Purchase Price" means, with respect to any Purchase on any date, the
aggregate price to be paid by Buyer to Originator for such Purchase in
accordance with Section 1.2 of the Agreement for the Receivables, Collections
and Related Security being sold to Buyer on such date, which price shall equal
the product of (x) the Original Balance of such Receivables, multiplied by (y)
the Purchase Price Factor then in effect.
"Purchase Price Credit" has the meaning set forth in Section 1.3 of the
Agreement.
"Purchase Price Factor" means a percentage calculated to provide Buyer with
a reasonable return on its investment in the Receivables after taking account of
(i) the time value of money based upon the anticipated dates of collection of
the Receivables and the cost to Buyer of financing its investment in the
Receivables during such period and (ii) the risk of nonpayment by the Obligors.
Originator and Buyer May agree from time to time to change the Purchase Price
Factor based on changes in one or more of the items affecting the calculation
thereof, provided that any change to the Purchase Price Factor shall take effect
as of the commencement of a Calculation Period, shall apply only prospectively
and shall not affect the Purchase Price payment in respect of Purchases which
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occurred during any Calculation Period ending prior to the Calculation Period
during which Originator and Buyer agree to make such change. The initial
Purchase Price Factor shall be 100.0%.
"Purchaser" means Conduit or a Financial Institution, as applicable.
"Receivable" means an Originated Receivable that has been identified for
sale to the Buyer or sold to the Buyer, as the context May require, but shall
not include any Removed Receivable from and after the date on which such Removed
Receivable is repurchased by the Originator hereunder.
"Related Security" means, with respect to any Receivable:
(i) all security interests or liens and property subject thereto from
time to time, if any, purporting to secure payment of such Receivable,
whether pursuant to the Contract related to such Receivable or otherwise,
together with all financing statements and security agreements describing
any collateral securing such Receivable,
(ii) all guaranties, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such Receivable or
otherwise,
(iii) all service contracts and other contracts and agreements
associated with such Receivable,
(iv) all Records related to such Receivable, and
(v) all proceeds of any of the foregoing.
"Repossessed Vacation Credits" means, with respect to a Charged-off
Receivable or a Defaulted Receivable, Vacation Credits which have been
repossessed from or returned by the Obligor on such Receivable (whether through
foreclosure, repossession, deed in lieu of foreclosure or other means).
"Required Capital Amount" means, as of any date of determination, an amount
equal to 3% of the Outstanding Balance of all Eligible Receivables.
"Resorts and Units" means those properties owned in fee simple by WorldMark
or in which WorldMark has a valid leasehold interest, which Obligors have
limited rights to use under the terms of the Contracts between Originator,
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WorldMark and Obligors. This definition includes all Resorts and Units in
existence as of the date of this Agreement or which come into existence during
the term of this Agreement.
"Revolving Period Termination Date" means January 5, 2001, or as extended
upon written notice from the Agent, on behalf of the Purchasers, to the Buyer.
"Sale Assignment" means the executed assignment of Originated Receivables,
substantially in the form of Exhibit IX, in conjunction with a Purchase.
"Schedule of Receivables" has the meaning set forth in Section 1.1 of the
Agreement.
"Settlement Date" means the 20th day of each calendar month (or if such day
is not a Business Day, then the next Business Day).
"Subordinated Loan" has the meaning set forth in Section 1.2(a) of the
Agreement.
"Subordinated Note" means a promissory note in substantially the form of
Exhibit VII hereto as more fully described in Section 1.2 of the Agreement, as
the same May be amended, restated, supplemented or otherwise modified from time
to time.
"Subscription Agreement" means that certain Stockholder and Subscription
Agreement, dated as of January 7, 2000, between Originator and Buyer,
substantially in the form of Exhibit VI hereto.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, association, limited liability company, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
Unless otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of Originator.
"Transaction Documents" means, collectively, this Agreement, the
Receivables Purchase Agreement, each Collection Account Agreement, the
Subordinated Note, the Subscription Agreement and all other instruments,
documents and agreements executed and delivered in connection herewith.
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"Upgrade" means the cancellation of an existing Contract and entry into a
new, 84-month Contract by an Obligor, WorldMark and TWRI, pursuant to which the
Obligor purchases additional Vacation Credits.
"Upgrade Contract" means the new Contract entered into by an Obligor, TWRI
and WorldMark related to an Upgrade by such Obligor.
"Upgrade Receivable" has the meaning set forth in Section 1.5 of this
Agreement.
"Vacation Credits" means ownership interests in WorldMark that entitle the
owner to use Resorts and Units.
"Vacation Owner Agreement" means such Contract between Originator,
WorldMark and any Obligor in substantially the same form as attached as Exhibit
I.
"WorldMark" has the meaning set forth in the preamble to the Agreement.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not specifically defined
herein, are used herein as defined in such Article 9.
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EXHIBIT II
Places of Business; Locations of Records;
Federal Employer Identification Number(s)
Places of Business:
Trendwest Resorts, Inc.
9805 Willows Road
Redmond, WA 98052
(425) 498-2500
(425) 498-3053 fax
Location of Records:
9805 Willows Road
Redmond, WA 98052
(425) 498-2500
(425) 498-3053 fax
Federal Employer Identification Number: 93-1004403
<PAGE>
EXHIBIT III
Account Numbers
Account Bank Name and Address Account Number
- ---------------- ----------------------------- --------------
Clearing Account Commerce Bank of Washington 1146602
601 Union Street
Suite 3900
Seattle, WA 98101
<PAGE>
EXHIBIT IV
Form of Compliance Certificate
This Compliance Certificate is furnished pursuant to that certain
Receivables Sale Agreement dated as of January 7, 2000, between Trendwest
Resorts Inc. and TW Holdings, III (the "Agreement"). Capitalized terms used and
not otherwise defined herein are used with the meanings attributed thereto in
the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected Vice President of Originator.
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Originator and its Subsidiaries during the accounting period
covered by the attached financial statements.
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which constitutes an
Amortization Event or a Potential Amortization Event, as each such term is
defined under the Agreement, during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below.
4. Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which Originator has taken, is taking, or proposes to
take with respect to each such condition or event:
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
in support hereof, are made and delivered this ___ day of ____________, ____.
_________________________________
[Name]
<PAGE>
EXHIBIT V
Credit and Collection Policy
<PAGE>
EXHIBIT VI
Form of Subscription Agreement
STOCKHOLDER AND SUBSCRIPTION AGREEMENT
THIS STOCKHOLDER AND SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of
January 7, 2000, is entered into by and between TW Holdings, III, Inc., a
Delaware corporation ("SPV"), and Trendwest Resorts, Inc., an Oregon corporation
("Parent"). Except as otherwise specifically provided herein, capitalized terms
used in this Agreement have the meanings ascribed thereto in the Receivables
Sale Agreement, dated as of even date herewith, between SPV and Parent (as
amended, restated, supplemented or otherwise modified from time to time, the
"Sale Agreement").
RECITALS
A. SPV has been organized under the laws of the State of Delaware for the
purpose of, among other things, purchasing, holding, financing, receiving and
transferring accounts receivable and related assets originated or otherwise held
by Parent.
B. Contemporaneously with the execution and delivery of this Agreement: (i)
Parent and SPV have entered into the Sale Agreement pursuant to which Parent
has, from and after the initial purchase date thereunder and prior to the
termination date specified therein, sold certain Receivables, Collections and
Related Security to SPV; and (ii) SPV, Parent, as Servicer, certain financial
institutions party thereto as "Purchasers," and Bank One, NA (Main Office
Chicago), as the "Agent" and the "Paying Agent," have entered into a Receivables
Purchase Agreement (as amended, restated, supplemented or otherwise modified
from time to time, the "Purchase Agreement") pursuant to which SPV will sell
"Purchaser Interests" to the Agent for the benefit of the Purchasers.
C. SPV desires to sell shares of its capital stock to Parent, and Parent
desires to purchase such shares, on the terms set forth in this Agreement.
NOW, THEREFORE, SPV and Parent agree as follows:
Section 1. Purchase and Sale of Capital Stock. Parent hereby purchases from
SPV, and SPV hereby issues and sells to Parent, 1,000 shares of common stock,
par value $0.01 per share, of SPV (the "Common Stock") for the Stock Purchase
Price set forth in Section 2(a). The shares of Common Stock being purchased
under this Agreement are referred to herein as the "Shares." Within three (3)
1
<PAGE>
Business Days from the date hereof, SPV shall deliver to Parent a certificate
registered in Parent's name representing the Shares.
Section 2. Consideration for Shares and Capital Contributions.
(a) Consideration for Shares. To induce SPV to enter into the Sale
Agreement and to enable SPV to fund its obligations thereunder by consummating
the transactions contemplated by the Purchase Agreement, and in reliance upon
the representations and warranties set forth herein, Parent hereby pays to SPV
on the date hereof the sum of $2,500,000 (the "Stock Purchase Price") in
consideration of the purchase of the Shares. The Stock Purchase Price shall take
the form of a transfer of cash, except that Parent may, in lieu of cash payment
of the Stock Purchase Price, offset the amount of the Stock Purchase Price
against the purchase price otherwise payable by SPV to Parent on the initial
purchase date pursuant to the Sale Agreement.
(b) Contributions After Initial Closing Date. From time to time Parent May
make additional capital contributions to SPV. All such contributions shall take
the form of a cash transfer, except that SPV agrees to, in lieu of cash payment
thereof, offset the amount of such contributions against the purchase price for
Receivables otherwise payable by SPV to Parent on the date of such capital
contributions. All of the Receivables so paid for through such offset shall
constitute purchased Receivables within the meaning of the Sale Agreement and
shall be subject to all of the representations, warranties and indemnities
otherwise made thereunder. It is expressly understood and agreed that Parent has
no obligations under this Agreement or otherwise to make any capital
contributions from and after payment of the Stock Purchase Price.
Section 3. Representations and Warranties of SPV. SPV represents and
warrants to Parent as follows:
(a) SPV is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, and has all requisite
corporate power and authority to carry on its business as proposed to be
conducted on the date hereof.
(b) SPV has all requisite legal and corporate power to enter into this
Agreement, to issue the Shares and to perform its other obligations under this
Agreement.
(c) Upon receipt by SPV of the Stock Purchase Price and the issuance of the
Shares to Parent, the Shares will be duly authorized, validly issued, fully paid
and nonassessable.
2
<PAGE>
(d) SPV has taken all corporate action necessary for its authorization,
execution and delivery of, and, its performance under, this Agreement.
(e) This Agreement constitutes a legally valid and binding obligation of
SPV, enforceable against SPV in accordance with its terms, except that
enforceability May be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(f) SPV has filed its Certificate of Incorporation in the form attached
hereto as Annex A with the Secretary of State of Delaware and (ii) adopted
By-laws in the form attached hereto as Annex B.
(g) The issuance of the Shares by SPV hereunder is legally permitted by all
laws and regulations to which SPV is subject.
Section 4. Representations and Warranties of Parent. Parent represents and
warrants to SPV as follows:
(a) Parent is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Oregon, and has all requisite corporate
power and authority to carry on its business as conducted on the date hereof.
(b) Parent has all requisite legal and corporate power to enter into this
Agreement, to purchase the Shares and to perform its other obligations under
this Agreement.
(c) Parent has taken all corporate action necessary for its authorization,
execution and delivery of, and its performance under, this Agreement.
(d) This Agreement constitutes a legally valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except that
enforceability May be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) Parent is purchasing the Shares for investment for its own account, not
as a nominee or agent, and not with a view to any distribution of any part
3
<PAGE>
thereof. Parent has no current intention of selling, granting a participation
in, or otherwise distributing, the shares.
(f) Parent understands that the Shares have not been registered under the
Securities Act of 1933, as amended, or under any other Federal or state law, and
that SPV does not contemplate such a registration.
(g) Parent has such knowledge, sophistication and experience in financial
and business matters that it is capable of evaluating the merits and risks of
the transactions contemplated by this Agreement, and has made such
investigations in connection herewith as have been deemed necessary or desirable
to make such evaluation.
(h) The purchase of the Shares by Parent is legally permitted by all laws
and regulations to which Parent is subject.
Section 5. Restrictions on Transfer Imposed by the Act; Legend.
(a) Legend. Each certificate representing any Shares shall be endorsed with
the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE NOT
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES ACT. SUCH SECURITIES SHALL NOT BE SOLD, PLEDGED,
HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED OR DISPOSED OF ABSENT
SUCH REGISTRATION, UNLESS, IN THE OPINION OF THE CORPORATION'S COUNSEL,
SUCH REGISTRATION IS NOT REQUIRED. IN ADDITION, THESE SECURITIES HAVE
BEEN ISSUED OR SOLD IN RELIANCE ON SECTION 4(2) OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACT.
(b) Registration of Transfers. SPV need not register a transfer of any
Shares unless the conditions specified in the legend set forth in Section 5(a)
hereof are satisfied. SPV May also instruct its transfer agent (which May be
SPV) not to register the transfer of any Shares unless the conditions specified
in the legend set forth in Section 5(a) hereof are satisfied.
4
<PAGE>
Section 6. Agreement to Vote. Parent hereby agrees and covenants to vote
all of the shares of Common Stock now or hereafter owned by it, whether
beneficially or otherwise, as is necessary at a meeting of stockholders of SPV,
or by written consent in lieu of any such meeting, to cause to be elected to,
and maintained on, SPV's board of directors at least one (1) person meeting the
qualifications of an Independent Director and selected in accordance with the
provisions of the Certificate of Incorporation of SPV.
Section 7. Successors and Assigns. Each party agrees that it will not
assign, sell, transfer, delegate, or otherwise dispose of, whether voluntarily
or involuntarily, or by operation of law, any right or obligation under this
Agreement except in connection with a transfer of Shares in compliance with the
terms and conditions hereof, as contemplated by Section 5(b) above, or otherwise
in accordance with the terms hereof. Any purported assignment, transfer or
delegation in violation of this Section 7 shall be null and void ab initio.
Subject to the foregoing limits on assignment and delegation and except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective heirs, legatees, executors,
administrators, assignees and legal successors.
Section 8. Amendments and Waivers. Any term hereof May be amended and the
observance of any term hereof May be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of SPV and Parent. Any amendment or waiver so effected shall be binding
upon SPV and Parent.
Section 9. Further Acts. Each party agrees to perform any further acts and
execute and deliver any document which May be reasonably necessary to carry out
the provisions of this Agreement.
Section 10. Counterparts. This Agreement May be executed in any number of
counterparts, and all of such counterparts together will be deemed one
instrument.
Section 11. Notices. Any and all notices, acceptances, statements and other
communications to Parent in connection herewith shall be in writing, delivered
personally, by facsimile or certified mail, return receipt requested, and shall
be addressed to the address of Parent indicated on the stock transfer register
of SPV or, if no address is so indicated, to the address provided to SPV
pursuant to the Sale Agreement unless changed by written notice to SPV or its
successor.
5
<PAGE>
Section 12. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS, EXCEPT AND TO THE
EXTENT THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE IS APPLICABLE.
Section 13. Entire Agreement. This Agreement, together with the Sale
Agreement and the documents expressly to be delivered in connection therewith,
constitute the entire understanding and agreement between the parties hereto
with subject matter hereof and thereof.
Section 14. Severability of this Agreement. In case any provision of this
Agreement shall be invalid or unenforceable, the validity, legality and
enforceability of the remaining shall not in any way be affected or impaired
thereby.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
TW HOLDINGS III, INC.
By:_________________________________
Name:
Title:
TRENDWEST RESORTS, INC.
By:_________________________________
Name:
Title:
7
<PAGE>
ANNEX A to Subscription Agreement
Certificate of Incorporation
<PAGE>
Annex B to Subscription Agreement
By-Laws
<PAGE>
EXHIBIT VII
Form of Subordinated Note
SUBORDINATED NOTE
January 7, 2000
1. Note. FOR VALUE RECEIVED, the undersigned, TW Holdings III, Inc., a
Delaware corporation ("SPV"), hereby unconditionally promises to pay to the
order of Trendwest Resorts, Inc., an Oregon corporation ("Originator"), in
lawful money of the United States of America and in immediately available funds,
on the date following the Amortization Date which is one year and one day after
the date on which (i) the Outstanding Balance of all Receivables sold under the
"Sale Agreement" referred to below has been reduced to zero and (ii) Originator
has paid to the Buyer all indemnities, adjustments and other amounts which May
be owed thereunder in connection with the Purchases (the "Collection Date"), the
aggregate unpaid principal sum outstanding of all "Subordinated Loans" made from
time to time by Originator to SPV pursuant to and in accordance with the terms
of that certain Receivables Sale Agreement dated as of January 7, 2000, between
Originator and SPV (as amended, restated, supplemented or otherwise modified
from time to time, the "Sale Agreement"). Reference to Section 1.2 of the Sale
Agreement is hereby made for a statement of the terms and conditions under which
the loans evidenced hereby have been and will be made. All terms which are
capitalized and used herein and which are not otherwise specifically defined
herein shall have the meanings ascribed to such terms in the Sale Agreement.
2. Interest. SPV further promises to pay interest on the outstanding unpaid
principal amount hereof from the date hereof until payment in full hereof at a
rate equal to 8.75%; provided, however, that if SPV shall default in the payment
of any principal hereof, SPV promises to pay, on demand, interest at the rate of
the 8.75% per annum on any such unpaid amounts, from the date such payment is
due to the date of actual payment. Interest shall be payable on the 20th day of
each month, or the next Business Day if such day is not a Business Day in
arrears; provided, however, that SPV May elect on the date any interest payment
is due hereunder to defer such payment and upon such election the amount of
interest due but unpaid on such date shall constitute principal under this
Subordinated Note. The outstanding principal of any loan made under this
Subordinated Note shall be due and payable on the Collection Date and May be
repaid or prepaid at any time without premium or penalty.
1
<PAGE>
3. Principal Payments. Originator is authorized and directed by SPV to
enter on the grid attached hereto, or, at its option, in its books and records,
the date and amount of each loan made by it which is evidenced by this
Subordinated Note and the amount of each payment of principal made by SPV, and
absent manifest error, such entries shall constitute prima facie evidence of the
accuracy of the information so entered; provided that neither the failure of
Originator to make any such entry or any error therein shall expand, limit or
affect the obligations of SPV hereunder.
4. Subordination. The indebtedness evidenced by this Subordinated Note is
subordinated to the prior payment in full of all of SPV's recourse obligations
under that certain Receivables Purchase Agreement dated as of January 7, 2000,
by and among SPV, Originator, as Servicer, Sage Systems, Inc., as "Custodian",
various "Purchasers" from time to time party thereto, and Bank One, NA (Main
Office Chicago), as the "Agent" and "Paying Agent" (as amended, restated,
supplemented or otherwise modified from time to time, the "Purchase Agreement").
The subordination provisions contained herein are for the direct benefit of, and
May be enforced by, the Agent and the Purchasers and/or any of their respective
assignees (collectively, the "Senior Claimants") under the Purchase Agreement.
Until the date on which all "Capital" outstanding under the Purchase Agreement
has been repaid in full and all other obligations of SPV and/or the Servicer
thereunder and under the "Fee Letter" referenced therein (all such obligations,
collectively, the "Senior Claim") have been indefeasibly paid and satisfied in
full, Originator shall not demand, accelerate, sue for, take, receive or accept
from SPV, directly or indirectly, in cash or other property or by set-off or any
other manner (including from or by way of collateral) any payment or security of
all or any of the indebtedness under this Subordinated Note or exercise any
remedies or take any action or proceeding to enforce the same; provided,
however, that (i) Originator hereby agrees that it will not institute against
SPV any proceeding of the type described in Section 5.1(d) of the Sale Agreement
unless and until the Collection Date has occurred and (ii) nothing in this
paragraph shall restrict SPV from paying, or Originator from requesting, any
payments under this Subordinated Note so long as SPV is not required under the
Purchase Agreement to set aside for the benefit of, or otherwise pay over to,
the funds used for such payments to any of the Senior Claimants and further
provided that the making of such payment would not otherwise violate the terms
and provisions of the Purchase Agreement. Should any payment, distribution or
security or proceeds thereof be received by Originator in violation of the
immediately preceding sentence, Originator agrees that such payment shall be
segregated, received and held in trust for the benefit of, and deemed to be the
property of, and shall be immediately paid over and delivered to the Agent for
the benefit of the Senior Claimants.
2
<PAGE>
5. Bankruptcy; Insolvency. Upon the occurrence of any proceeding of the
type described in Section 5.1(d) of the Sale Agreement involving SPV as debtor,
then and in any such event the Senior Claimants shall receive payment in full of
all amounts due or to become due on or in respect of Capital and the Senior
Claim (including "CP Costs" and "Yield" accruing under the Purchase Agreement
after the commencement of any such proceeding, whether or not any or all of such
CP Costs or Yield is an allowable claim in any such proceeding) before
Originator is entitled to receive payment on account of this Subordinated Note,
and to that end, any payment or distribution of assets of SPV of any kind or
character, whether in cash, securities or other property, in any applicable
insolvency proceeding, which would otherwise be payable to or deliverable upon
or with respect to any or all indebtedness under this Subordinated Note, is
hereby assigned to and shall be paid or delivered by the Person making such
payment or delivery (whether a trustee in bankruptcy, a receiver, custodian or
liquidating trustee or otherwise) directly to the Agent for application to, or
as collateral for the payment of, the Senior Claim until such Senior Claim shall
have been paid in full and satisfied.
6. Amendments. This Subordinated Note shall not be amended or modified
except in accordance with Section 7.1 of the Sale Agreement. The terms of this
Subordinated Note May not be amended or otherwise modified without the prior
written consent of the Agent for the benefit of the Purchasers.
7. GOVERNING LAW. THIS SUBORDINATED NOTE HAS BEEN MADE AND DELIVERED AT
CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS AND DECISIONS OF THE
STATE OF ILLINOIS. WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE
SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
SUBORDINATED NOTE.
8. Waivers. All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
Originator additionally expressly waives all notice of the acceptance by any
Senior Claimant of the subordination and other provisions of this Subordinated
3
<PAGE>
Note and expressly waives reliance by any Senior Claimant upon the subordination
and other provisions herein provided.
9. Assignment. This Subordinated Note May not be assigned, pledged or
otherwise transferred to any party other than Originator without the prior
written consent of the Agent, and any such attempted transfer shall be void.
TW HOLDINGS III, INC.
By:_____________________________
Title:
4
<PAGE>
Schedule
to
SUBORDINATED NOTE
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Date Amount of Amount of Principal Unpaid Principal Notation made
Subordinated Loan Paid Balance by
<S> <C> <C> <C> <C>
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
___________________ _____________________ ______________________ __________________ ______________
</TABLE>
<PAGE>
EXHIBIT VIII
Form of Vacation Owner Agreement
<PAGE>
EXHIBIT IX
Form of Sale Assignment
TRENDWEST RESORTS, INC.
AND
TW HOLDINGS III, INC.
SALE ASSIGNMENT, dated as of [__], 200[_], between Trendwest Resorts, Inc.
(the "Seller") and TW Holdings III, Inc. (the "Buyer")
1. We refer to the Receivable Sale Agreement (the "Sale Agreement") dated
as of January 7, 2000 between the Seller and the Buyer. 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. The Seller does hereby sell, transfer, assign, set over and convey to
the Buyer all right, title and interest of the Seller in and to the Receivables
listed on Schedule 1 hereto (each, a "Receivable"), and the Buyer does hereby
purchase each such Receivable.
3. The Outstanding Balance for the Receivables sold and purchased, pursuant
to paragraph 2 hereof is $[ ]. The Purchase Price for the Receivables sold and
purchased hereby is $ [__] ,representing the product of (x) the Original Balance
of such Receivables, multiplied by (y) the Purchase Price Factor (as defined in
the Sale Agreement) then in effect. The Purchase Price shall be payable in full
contemporaneously with the execution of this Sale Assignment, as provided in
Section 1.1 of the Sale Agreement.
1
<PAGE>
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 III, INC.,
as Buyer
By: ________________________
Name:
Title:
2
<PAGE>
SCHEDULE 2
SCHEDULE OF RECEIVABLES
<PAGE>
Schedule A
DOCUMENTS TO BE DELIVERED TO BUYER
ON OR PRIOR TO THE INITIAL PURCHASE
1. Copy of the Resolutions of the Board of Directors of Originator
certified by its Secretary, authorizing Originator's execution,
delivery and performance of the Agreement and the other documents to
be delivered by it thereunder.
2. Articles or Certificate of Incorporation (or equivalent organizational
documents) of Originator certified by the Secretary of State of the
jurisdiction of incorporation of Originator on or within thirty (30)
days prior to the initial Purchase.
3. Good Standing Certificate for Originator issued by the Secretaries of
State of California, Oregon and Washington.
4. A certificate of the Secretary of Originator certifying: (i) the names
and signatures of the officers authorized on its behalf to execute the
Agreement and any other documents to be delivered by it thereunder and
(ii) a copy of Originator's By-Laws.
5. Time stamped receipt copies of proper financing statements, duly filed
under the UCC on or before the date of such initial Purchase in all
jurisdictions as May be necessary or, in the opinion of Buyer (or its
assigns), desirable, under the UCC of all appropriate jurisdictions or
any comparable law in order to perfect the ownership interests
contemplated by the Agreement.
6. Delivered simultaneous to the Initial Purchase, executed copies of
proper releases and UCC termination statements, ready for filing, if
any, necessary to release all security interests and other rights of
any Person in the Receivables, Contracts or Related Security
previously granted by Originator.
7. Executed Collection Account Agreements for each Lock-Box and
Collection Account.
8. A favorable opinion of legal counsel for Originator reasonably
acceptable to Buyer (or its assigns) which addresses the following
matters and such other matters as Buyer (or its assigns) Agent May
reasonably request:
1
<PAGE>
-- Originator is a corporation duly incorporated,
validly existing, and in good standing under the laws
of its state of incorporation.
-- Originator has all requisite authority to conduct its
business in each jurisdiction where failure to be so
qualified would have a material adverse effect on
Originator's business.
-- The execution and delivery by Originator of the
Agreement and each other Transaction Document to
which it is party and its performance of its
obligations thereunder have been duly authorized by
all necessary corporate action and proceedings,
corporate or otherwise, on the part of Originator and
will not:
(a) require any action by or in respect of, or
filing with, any governmental body, agency
or official (other than the filing of UCC
financing statements);
(b) contravene, or constitute a default under,
any provision of applicable law or
regulation or of its Articles of
Incorporation or Bylaws (or equivalent
organizational documents) or of any
agreement, judgment, injunction, order,
decree or other instrument binding upon
Originator; or
(c) result in the creation or imposition of any
Adverse Claim on assets of Originator or any
of its Subsidiaries (except as contemplated
by the Agreement).
-- The Agreement and each other Transaction Document to
which it is a party has been duly executed and
delivered by Originator (the Originating Parties) and
constitutes the legal, valid, and binding obligation
of Originator enforceable in accordance with its
terms, except to the extent the enforcement thereof
May be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights
generally and subject also to the availability of
equitable remedies if equitable remedies are sought.
-- Counsel is without knowledge of any matters or facts
contrary to the Representations and Warranties
contained in Section 2.1 of the Sales Agreement.
2
<PAGE>
-- Originator is not an "investment company" registered
or required to be registered under the Investment
Company Act of 1940.
10. A "true sale" opinion and "substantive consolidation" opinion of
counsel for Originator with respect to the transactions contemplated
by the Agreement and the Purchase Agreement.
11. A Compliance Certificate.
12. A direction letter executed by Originator authorizing Buyer and its
assigns, and directing warehousemen to allow Buyer and its assigns, to
inspect and make copies from Originator's books and records maintained
at off-site data processing or storage facilities.
13. A form of Monthly Report.
14. Executed copies of (i) all consents from and authorizations by any
Persons and (ii) all waivers and amendments to existing credit
facilities, that are necessary in connection with the Agreement.
16. State of Washington Public Offering Documents including (i)
Declaration of Vacation Owner Program for WorldMark certified by State
of Washington Department of Real Estate, (ii) statement compliance
with registration requirements of Oregon, Hawaii and California, and
(iii) statement of clear title, to WorldMark properties.
17. Good Standing Certificate for WorldMark issued by the Secretaries of
State of each jurisdiction where it has material operations.
18. A favorable opinion of in-house counsel to the originator stating
that, to the best of the opinion givers knowledge, there is no action,
suit or other proceeding against Originator, WorldMark or any
Affiliate of Originator or WorldMark, which would materially adversely
affect the business or financial condition of Originator or WorldMark
and their respective Affiliates taken as a whole or which would
materially adversely affect the ability of Originator to perform its
obligations under the Agreement.
3
<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>
<CIK> 0001021252
<NAME> Trendwest Resorts, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,762
<SECURITIES> 0
<RECEIVABLES> 96,024
<ALLOWANCES> 16,912
<INVENTORY> 51,191
<CURRENT-ASSETS> 0
<PP&E> 29,582
<DEPRECIATION> 3,832
<TOTAL-ASSETS> 220,612
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 56,997
<OTHER-SE> 123,971
<TOTAL-LIABILITY-AND-EQUITY> 220,612
<SALES> 62,863
<TOTAL-REVENUES> 73,544
<CGS> 14,591
<TOTAL-COSTS> 15,013
<OTHER-EXPENSES> 37,830
<LOSS-PROVISION> 4,604
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 16,050
<INCOME-TAX> 6,380
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,670
<EPS-BASIC> .57
<EPS-DILUTED> .57
</TABLE>
