EXHIBIT 10.25
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SERVICING AGREEMENT
among
TRI FUNDING V, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer" or "Trendwest")
and
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee
("Trustee")
Dated as of August 1, 2001
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TABLE OF CONTENTS
<Table>
<Caption>
SECTION HEADING PAGE
ARTICLE 1 DEFINITIONS............................................................................1
Section 1.01. Defined Terms..........................................................................1
ARTICLE 2 SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS.....................................4
Section 2.01. Representations and Warranties.........................................................4
Section 2.02. Covenants..............................................................................5
ARTICLE 3 ADMINISTRATION AND SERVICING OF CONTRACTS..............................................6
Section 3.01. Responsibilities of Servicer...........................................................6
Section 3.02. Standard of Care.......................................................................8
Section 3.03. Local Bank Account, ACH Payments and Servicer Remittances..............................9
Section 3.04. Property Management....................................................................9
Section 3.05. Financing Statements..................................................................10
Section 3.06. [Reserved.]...........................................................................10
Section 3.07. [Reserved.]...........................................................................10
Section 3.08. No Offset.............................................................................10
Section 3.09. Servicing Compensation................................................................10
Section 3.10. Substitution or Purchase of Contracts and Receivables.................................11
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS...................................................12
Section 4.01. Monthly Servicer's Reports............................................................12
Section 4.02. Financial Statements; Certification as to Compliance; Notice of Default...............12
Section 4.03. Independent Accountants' Reports......................................................14
Section 4.04. Access to Certain Documentation and Information.......................................15
Section 4.05. Trustee to Cooperate..................................................................16
Section 4.06. Oversight of Servicing................................................................17
ARTICLE 5 THE SERVICER AND THE ISSUER...........................................................17
Section 5.01. Servicer Indemnification..............................................................17
Section 5.02. Corporate Existence; Reorganizations..................................................18
Section 5.03. Limitation on Liability of the Servicer and Others....................................18
Section 5.04. Servicer Not to Resign................................................................18
Section 5.05. Issuer Indemnification................................................................19
ARTICLE 6 SERVICING TERMINATION.................................................................19
Section 6.01. Servicer Events of Default............................................................19
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Section 6.02. Appointment of Successor Servicer.....................................................22
Section 6.03. Notification to Noteholders...........................................................22
Section 6.04. Waiver of Past Defaults...............................................................23
Section 6.05. Effects of Termination of Servicer....................................................23
Section 6.06. No Effect on Other Parties............................................................23
Section 6.07. Continued Errors......................................................................23
ARTICLE 7 [RESERVED]............................................................................24
ARTICLE 8 MISCELLANEOUS PROVISIONS..............................................................24
Section 8.01. Termination of the Servicing Agreement................................................24
Section 8.02. Amendments............................................................................24
Section 8.03. Governing Law.........................................................................25
Section 8.04. Notices, etc., to Trustee, Issuer and Servicer........................................25
Section 8.05. Notices and Other Documents to Noteholders; Waiver....................................26
Section 8.06. Severability of Provisions............................................................26
Section 8.07. Binding Effect........................................................................26
Section 8.08. Article Headings and Captions.........................................................26
Section 8.09. Legal Holidays........................................................................26
Section 8.10. Assignment for Security for the Notes.................................................27
Section 8.11. No Assignment of Servicing Agreement..................................................27
Section 8.12. Counterparts..........................................................................27
Section 8.13. Parties Will Not Institute Insolvency Proceedings.....................................27
Signatures.......................................................................................................28
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EXHIBIT A -- Form of Monthly Servicer's Report
EXHIBIT B -- Permitted Changes to Property Management Agreement
EXHIBIT C -- Form of Report of Independent Accountants
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SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of August 1, 2001 (the "Agreement"),
by and among TRI FUNDING V, Inc., a Delaware corporation (herein, together with
its permitted successors and assigns, the "Issuer"), TRENDWEST RESORTS, INC., an
Oregon corporation, for itself (together with its successors and assigns,
"Trendwest") as servicer hereunder (herein, together with its permitted
successors and assigns, the "Servicer"), and WELLS FARGO BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association as trustee (herein,
together with its permitted successors and assigns, the "Trustee") under the
Indenture (defined below).
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of August 1, 2001
(as amended and supplemented from time to time, the "Indenture"), with the
Trustee and the Servicer, pursuant to which the Issuer intends to issue its
Receivables-Backed Notes (collectively, the "Notes").
The Issuer, Trendwest Resorts, Inc. (not as Servicer, but acting on its
own behalf, "Trendwest") and TW Holdings III, Inc., a Delaware corporation ("TWH
III"), have entered into a Receivables Purchase Agreement, dated as of August 1,
2001 (as amended and supplemented from time to time, the "Receivables Purchase
Agreement"), providing for, among other things, the sale by Trendwest and TWH
III to the Issuer of the Assets, as defined in the Receivables Purchase
Agreement. Under the terms and conditions set forth in the Indenture, the Issuer
is and will be pledging such Assets to the Trustee as security for the Notes. As
a precondition to the effectiveness of the Receivables Purchase Agreement, the
Receivables Purchase Agreement requires that the Servicer, the Issuer and the
Trustee enter into this Agreement to provide for the servicing of the Assets.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Receivables Purchase Agreement, and the Servicer
agrees that all covenants and agreements made by the Servicer herein with
respect to the Assets shall also be for the benefit and security of the Trustee
and all Holders from time to time of the Notes. For its services under this
Agreement, the Servicer will receive a Servicer Fee as provided herein and in
the Indenture.
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. Except as otherwise specified or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such terms
and to the masculine, feminine and neuter genders of such terms. Capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Indenture.
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"Assets" shall have the meaning specified in the Receivables Purchase
Agreement.
"Contract Files" shall have the meaning specified in the Receivables
Purchase Agreement.
"Custodian Agreement" shall mean the Custodian Agreement, dated as of
August 1, 2001, among Wells Fargo, as custodian, the Trustee, the Issuer and
Trendwest, as amended and supplemented from time to time.
"Custodian Files" shall have the meaning specified in the Receivables
Purchase Agreement.
"Independent Accountants" shall mean KPMG LLP or another firm of public
accountants of nationally recognized standing; provided, that such firm is
independent with respect to the Servicer within the meaning of the Securities
Act of 1933, as amended.
"Institutional Investor" shall have the meaning specified in the
Indenture.
"Issuer" shall mean TRI Funding V, Inc., a Delaware corporation, and
its permitted successors and assigns.
"Loan Document" shall have the meaning specified in the Receivables
Purchase Agreement.
"Liquidated Receivable" shall mean a Receivable that has been
liquidated pursuant to Section 3.01(b) hereof.
"Local Bank" shall mean Keybank National Association, and its
successors and assigns.
"Local Bank Account" shall mean the account established by the Servicer
in the name of the Trustee at the Local Bank, into which account collections
with respect to the Contracts and Mortgage Loans will be deposited by the
Servicer.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer pursuant to Section 4.01 hereof, a form of which is attached hereto as
Exhibit A.
"Officer's Certificate" shall mean, for any Person, a certificate
signed by the President, any Vice President, Treasurer, Assistant Treasurer or
Secretary of such Person and, in the case of the Issuer, any authorized
representative of the Issuer.
"Opinion of Counsel" shall mean a written opinion of counsel in a form
that is, and from counsel who is, reasonably acceptable to the person requesting
such opinion.
"Receivables Purchase Agreement" shall mean the Receivables Purchase
Agreement, dated as of the date hereof, among Trendwest, TWH III and the Issuer
as the same may be amended or modified from time to time, together with any
annexes, appendices, exhibits or schedules thereto and including the Asset
Assignment and any Subsequent Asset Assignment executed and delivered in
connection therewith.
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"Remittance Date" shall mean the Business Day immediately preceding
each Payment Date.
"Reported Company" shall mean each of the Issuer, WorldMark, Trendwest
and its subsidiaries, provided, however, if Trendwest is no longer acting as
Servicer, then "Reported Company" shall also mean any successor Servicer
appointed pursuant to this Agreement.
"Reported Company's Financial Statements" shall include each Reported
Company's audited consolidated balance sheet, income statement, statement of
cash flows, auditors opinion letter regarding audited financial statements, all
notes to the audited financial statements and, with respect to Trendwest, a
letter stating that either (i) the auditors have found no material weakness or
(ii) specifying any material weaknesses found by such auditors; Trendwest's and
WorldMark's financial statements shall be audited, but, with respect to any
other Reported Company, if such information is not currently being audited, then
such information may be unaudited.
"Servicer" shall initially mean Trendwest Resorts, Inc. until a
successor Person shall have become the Servicer pursuant to the applicable
provisions of this Agreement, and thereafter "Servicer" shall mean such
successor Person.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice" means the notice described in Section
6.01 hereof.
"Servicing Officer" shall mean those officers of the Servicer involved
in, or responsible for, the administration and servicing of the Assets, as
identified on the list of Servicing Officers furnished by the Servicer to the
Trustee and the Noteholders from time to time.
"Substitution Criterion" shall have the meaning specified in the
Receivables Purchase Agreement.
"Substitute Receivable" shall have the meaning specified in the
Receivables Purchase Agreement.
"Trustee" shall initially mean Wells Fargo, until a successor Person
shall have become the Trustee pursuant to the applicable provisions of the
Indenture, and thereafter "Trustee" shall mean such successor Person.
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"TWH III" shall mean TW Holdings III, Inc., a Delaware corporation, and
its permitted successors and assigns.
"Wells Fargo" shall mean Wells Fargo Bank Minnesota, National
Association, a national banking association, and its permitted successors and
assigns.
ARTICLE 2
SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties to the Trustee and for the benefit of
the Noteholders as of each Transfer Date, which shall survive the Prefunding
Period Termination Date:
(a) Organization and Good Standing. The Servicer has been
duly incorporated and is validly existing in good standing as a
corporation under the laws of the State of Oregon, with requisite
corporate power and authority to own its properties, perform its
obligations under this Agreement and the Indenture and to transact the
business in which it is now engaged or in which it proposes to engage;
the Servicer is duly qualified to do business and is in good standing
in each State in which the nature of its business requires it to be so
qualified, except where failure to so qualify would not have a material
adverse effect on the ability of the Servicer to perform its
obligations under this Agreement and the Indenture.
(b) Authorization and Binding Obligation. Each of this
Agreement and the Indenture has been duly authorized, executed and
delivered by the Servicer and constitutes the valid and legally binding
obligation of the Servicer enforceable against the Servicer in
accordance with its terms, subject as to enforcement to any bankruptcy,
insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and
to general principles of equity regardless of whether enforcement is
sought in a court of equity or law.
(c) No Violation. The entering into of this Agreement and the
Indenture and the performance by the Servicer of its obligations under
this Agreement and the Indenture and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the
Servicer pursuant to the terms of any material indenture, mortgage,
deed of trust or other agreement or instrument to which it is a party
or by which it is bound or to which any of its property or assets is
subject, nor will such action result in any violation of the provisions
of its articles of incorporation or by-laws, or any statute or any
order, rule or regulation of any court or any regulatory authority or
other governmental agency or body having jurisdiction over it or any of
its properties; and no consent, approval, authorization, order,
registration or qualification of or with any court, or any such
regulatory authority or other governmental agency or body is required
for the Servicer to enter into this Agreement and the Indenture.
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(d) No Proceedings. There are no proceedings or
investigations pending, or to the knowledge of the Servicer, threatened
against or affecting the Servicer or any subsidiary in or before any
court, governmental authority or agency or arbitration board or
tribunal, including but not limited to any such proceeding or
investigation with respect to any environmental or other liability
resulting from the ownership or use of any of the Vacation Credits or
Fractional Interests, which, individually or in the aggregate, involve
the possibility of materially and adversely affecting the properties,
business, prospects, profits or condition (financial or otherwise) of
the Servicer and its subsidiaries, or the ability of the Servicer to
perform its obligations under this Agreement or the Indenture. The
Servicer is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of any
laws, ordinances, governmental rules or regulations to which it is
subject, (ii) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the
ownership of its property or to the conduct of its business, and (iii)
is not in violation in any material respect of any term of any
agreement, charter instrument, bylaw or instrument to which it is a
party or by which it may be bound, which violation or failure to obtain
materially adversely affect the business or condition (financial or
otherwise) of the Servicer and its subsidiaries.
(f) Investment Company. The Servicer is not an
investment company which is required to register under the Investment
Company Act of 1940, as amended.
(g) Fidelity Bond. The Servicer has insurance
coverage for employee dishonesty with respect to funds it holds in
an amount equal to $500,000 per occurrence and coverage under an
errors and omissions policy.
(h) ERISA. Except for one 401(k) plan, the Servicer
does not have or maintain any pension plans.
Section 2.02. Covenants. (a) The Servicer covenants as to the Assets:
(i) The Servicer shall not release or assign any Lien in
favor of the Trustee on any Receivables or the Related Security related
to any Contract in whole or in part, except as permitted herein or in
the Indenture.
(ii) The Servicer will in all material respects duly fulfill
all obligations on the Servicer's part to be fulfilled under or in
connection with the Assets. The Servicer will not amend, rescind,
cancel or modify any Contract or term or provision thereof, except as
permitted herein or in the Indenture or in connection with an Upgrade,
and the Servicer will not do anything that would impair the rights of
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the Noteholders in the Assets, except as contemplated herein or in the
Indenture; provided that, without limiting the foregoing, the Servicer
may once per Contract, over the lifetime of such Loan Document allow
the Obligor of such Loan Document to skip one Scheduled Payment and add
one month to the term of such Loan Document; provided, further, that
such extension will not extend the date of the last payment of any Loan
Document that terminates prior to the Stated Maturity one month beyond
the Stated Maturity of the Notes.
(iii) As more specifically set forth below, in performing its
servicing duties hereunder, the Servicer shall collect all payments
required to be made by the Obligors under the Contracts and enforce all
material rights of the Issuer under the Contracts. The Servicer shall
not assign, sell, pledge or exchange or in any way encumber or
otherwise dispose of the Receivables or the Related Security, except as
permitted hereunder or in the Indenture.
(b) The Servicer will deliver each of the accountings, statements and
reports described in Article 4 hereof to each party as set forth therein.
(c) The Servicer shall maintain insurance coverage for employee
dishonesty with respect to funds it holds in an amount greater than or equal to
$500,000 per occurrence and coverage under an errors and omissions policy.
(d) Trendwest and the Servicer, if not Trendwest, will not consent
(except as may be required by the reasonableness standard in Section 2.3 of the
Third Amended Vacation Program Agreement, dated as of June 3, 1994, between
Trendwest and WorldMark, as amended) to any request from WorldMark to allow
WorldMark to encumber, pledge or hypothecate any vacation property under such
Section 2.3.
ARTICLE 3
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for the
benefit of the Noteholders, shall be responsible for, and shall, in accordance
with its customary practices, pursue the managing, servicing, administering,
enforcing and making of collections on the Contracts and the Related Security,
the enforcement of the Trustee's security interest in the Receivables and the
Related Security granted pursuant to the Indenture, and, if applicable, the
resale of the Related Security, each in accordance with applicable law and the
standards and procedures set forth in this Agreement and any related provisions
of the Indenture and the Receivables Purchase Agreement. The Servicer's
responsibilities shall include collecting and posting of all payments,
responding to inquiries of Obligors, investigating delinquencies, accounting for
collections and furnishing monthly and annual statements to the Trustee, the
6
Noteholders and the Rating Agencies with respect to payments and using its best
efforts to maintain the perfected security interest of the Trustee in those
items of the Trust Estate in which the Trustee has a perfected security
interest. Subject to the terms and conditions of this Agreement, the Servicer
(at its expense), acting alone or through a subservicer, shall have full power
and authority, acting at its sole discretion, to do any and all things in
connection with such managing, servicing, administration, enforcement,
collection and such resale of the Related Security that it may deem necessary or
desirable and in the best interests of the Noteholders, including the prudent
delegation of such responsibilities. Without limiting the generality of the
foregoing, the Servicer, in its own name, shall, and is hereby authorized and
empowered by the Trustee, subject to Section 3.02 hereof, to execute and deliver
(on behalf of itself, the Noteholders, the Trustee or any of them) any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Contracts,
the Mortgage Notes, the Custodian Files and the Contract Files. Subject to the
terms and conditions of this Agreement, the Servicer, also may, in its sole
discretion, waive any late payment charge or penalty, or any other fees that may
be collected in the ordinary course of servicing any Contract. Notwithstanding
the foregoing, the Servicer, shall not, except pursuant to a judicial order from
a court of competent jurisdiction, or as otherwise expressly provided in this
Agreement, release or waive the right to collect the Scheduled Payments or any
unpaid balance on any Contract. The Trustee shall, at the request and expense of
the Servicer, furnish the Servicer, with any powers of attorney and other
documents necessary or appropriate to enable the Servicer to carry out their
servicing and administrative duties hereunder, and the Trustee shall not be
responsible for the Servicer's application thereof. Notwithstanding any
delegation of its responsibilities hereunder, the Servicer shall remain
primarily liable for the full performance of its obligations hereunder.
(b) The Servicer shall conduct any management, servicing,
administration, collection or enforcement actions with respect to the Collateral
in the following manner:
(i) The Servicer, as agent for and on behalf of the Issuer,
with respect to any Defaulted Contract shall follow such practices and
procedures as are normal and consistent with the Servicer's standards
and procedures relating to its own contracts, mortgage loans,
receivables, vacation credits and fractional interests that are similar
to the Contracts, the Receivables, the Vacation Credits and Fractional
Interests, including without limitation, the taking of appropriate
actions to foreclose or otherwise liquidate any such Defaulted
Contract, together with the Related Security and to enforce the
Issuer's rights in or under the Receivables Purchase Agreement. The
Servicer shall continue its customary practice of applying payments on
Defaulted Contracts and Delinquent Contracts first to delinquent
interest, then to interest and then to principal. All Recoveries or
Residual Proceeds in respect of any such Receivable and the Related
Security received by the Servicer shall be deposited in the Local Bank
Account pursuant to Section 3.03(a);
(ii) The Servicer may sue to enforce or collect upon Contracts
as agent for the Trustee. If the Servicer elects to commence a legal
proceeding to enforce a Contract or Mortgage Loan, the act of
commencement shall be deemed to be an automatic assignment of such Loan
Document to the Servicer for purposes of collection only. If, however,
in any enforcement suit or legal proceeding it is held that the
Servicer may not enforce a Contract or Mortgage Loan on the ground that
it is not a real party in interest or a holder entitled to enforce such
Loan Document, then the Trustee shall, at the Servicer's request and
expense, take such steps as the Servicer deems necessary and instructs
the Trustee in writing to take to enforce such Loan Document, including
bringing suit in its name or the name of the Issuer or the names of the
Noteholders, and the Trustee shall be indemnified by the Servicer for
any such action taken;
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(iii) The Servicer shall exercise any rights of recourse
against third parties that exist with respect to any Loan Document in
accordance with the Servicer's usual practice and applicable law. In
exercising recourse rights, the Servicer is authorized on the Trustee's
behalf to reassign the Contract or Mortgage Loan, as applicable, to the
person against whom recourse exists to the extent necessary, and at the
price set forth in the document creating the recourse. The Servicer
will not reduce or diminish such recourse rights, except to the extent
that it exercises such right;
(iv) The Servicer will not allow any substitution of a
Substitute Contract that does not comply with Section 3.10 hereof,
Sections 3.03 and 3.04 of the Receivables Purchase Agreement, Section
4.03 of the Indenture and the definition of Eligible Contract;
(v) The Servicer may waive, modify or vary any terms of any
Contract or consent to the postponement of strict compliance with any
such term if in the Servicer's reasonable and prudent determination
such waiver, modification or postponement is not materially adverse to
the Noteholders; provided, however, that (A) the Servicer shall not
forgive any payment, and (B) the Servicer shall not permit any
modification, waivers, variation or postponements with respect to any
Contract that would decrease the Scheduled Payment, decrease the
interest rate, defer the payment of any principal or interest or any
Scheduled Payment, reduce the Collateral Value of such Contract (except
in connection with actual payments attributable to such Collateral
Value), or prevent the complete amortization of the Collateral Value of
such Contract from occurring by the Calculation Date preceding the
Stated Maturity with respect to such Notes. The Monthly Servicer's
Report shall indicate any modification of any Scheduled Payment
pursuant to Section 2.02(a)(ii) hereof; and
(vi) Notwithstanding any provision to the contrary contained
in this Agreement, the Servicer shall exercise any right under a
Contract to accelerate the unpaid Scheduled Payments, due or to become
due thereunder in such a manner as to maximize the net proceeds
available to the Issuer; provided, however, that the Servicer will not
accelerate any Scheduled Payment unless permitted to do so by the terms
of the Contract and under applicable law.
Section 3.02. Standard of Care. In managing, administering, servicing,
enforcing and making collections on the Contracts and the Related Security
pursuant to this Agreement, the Servicer will provide such services in a manner
consistent with past practice and applicable law and will not change such
practice in any way that would cause an adverse material change in such
practice. In any event, the Servicer warrants that in providing such services it
will exercise that degree of skill and care consistent with that which other
servicers in the industry customarily exercise with respect to similar
contracts, vacation credits and fractional interests owned or serviced by them.
The Servicer shall punctually perform all of its obligations and agreements
under this Agreement and shall comply with all applicable federal and State laws
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and regulations, shall maintain all State and federal licenses and franchises
necessary for it to perform its servicing responsibilities hereunder, and shall
not materially impair the rights of the Noteholders in any Contracts or Mortgage
Loans or payments thereunder.
Section 3.03. Local Bank Account, ACH Payments and Servicer Remittances.
(a) The Servicer has previously instructed (or, with respect to Substitute
Contracts or Subsequent Contracts, will have instructed) each Obligor that does
not pay by automatic payment to remit his or her payments to a post office box
in the name of the Servicer. The Servicer shall cause the Local Bank to deposit
into the Local Bank Account, within one Business Day of receipt, all payments on
the Receivables that are received in such post office box. The Servicer shall
direct all Obligors to make all payments to such post office box. The Servicer
shall cause payments made by automated clearing house debit to be deposited
directly into the Local Bank Account from applicable Obligors' relevant account.
On each Business Day, the Servicer shall, or shall cause the Local Bank to,
transfer all good funds in the Local Bank Account collected relating to the
Contracts and the Receivables (including the purchase price thereof) to the
Collection Account, which shall be an Eligible Account at the Trustee in the
name of the Trustee on behalf of the Noteholders. The Trustee, based solely on
information set forth in each Monthly Servicer's Report, shall cause the amounts
in the Collection Account to be withdrawn from the Collection Account on related
Payment Date in an amount necessary to make the distributions set forth in
Section 12.02(d) or 12.02(e) of the Indenture on such Payment Date.
(b) Except as otherwise provided in this Agreement, the Servicer, as
agent of the Issuer, shall remit for deposit in the Local Bank Account by 4:00
p.m., Seattle time, on each Business Day the amounts described below that have
been received by the Servicer through 4:00 p.m., Seattle time, on the preceding
Business Day:
(i) all payments made under the Contracts relating to the
Receivables due after the applicable Cut-Off Date, including
prepayments but excluding taxes, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries; and
(iii) the Purchase Price of any Contract or Mortgage
Loan to the extent received by the Servicer.
The Servicer shall hold in trust for the benefit of the Holders of the
Notes any payment it receives relating to items (i) through (iii) above until
such time as the Servicer transfers any such payment to the Local Bank for
deposit in the Local Bank Account. Any such amounts held in the Local Bank
Account shall be held in trust for the benefit of the Noteholders.
Section 3.04. Property Management. Trendwest will continue to manage the
Club in accordance with the management agreement between Trendwest and WorldMark
in existence as of the date hereof, as the same may be amended from time to time
on account of (i) a change in such agreement approved by a majority of the
members of WorldMark, (ii) a change in the agreement made in order to keep
Trendwest or WorldMark in compliance with federal, state or local laws, rules
and regulations, (iii) as such agreement may be amended from time to time with
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the written consent of the Holders of Notes representing 66-2/3% in principal
amount of the Outstanding Notes of the Controlling Class or (iv) a change in
such agreement in the manner described in Exhibit B to this Agreement.
Section 3.05. Financing Statements. (a) The Servicer will make all UCC
filings and recordings as may be required to perfect the security interests of
the Trustee in the Trust Estate pursuant to the terms of the Indenture. In the
event of any foreclosure on a Fractional Interest, the Servicer shall file on
behalf of the Trustee the Assignments of Mortgage, if any, necessary for the
Servicer or the Trustee to foreclosure on such Fractional Interest. The Servicer
shall, in accordance with its customary servicing procedures and at its own
expense, be responsible for such steps as are necessary to maintain perfection
of such security interests. The Trustee hereby authorizes the Servicer to
re-perfect or to cause the re-perfection of such security interest on its behalf
as Trustee, as necessary.
(b) Within thirty (30) days from the date upon which the financing
statements are filed in connection with the issuance of the Notes, the Servicer
shall cause searches to be conducted in such offices and promptly deliver the
results of such searches to the Trustee.
Section 3.06. [Reserved.]
Section 3.07. [Reserved.]
Section 3.08. No Offset. Prior to the termination of this Agreement, the
obligations of the Servicer under this Agreement shall not be subject to any
defense, counterclaim or right of offset which the Servicer has or may have
against the Issuer, the Trustee or any Noteholder whether in respect of this
Agreement, the Indenture, the Notes, the Receivables Purchase Agreement, any
Contract, Mortgage Loan, Receivable, Related Security or otherwise.
Section 3.09. Servicing Compensation. As compensation for the
performance of its obligations under this Agreement, the Servicer shall be
entitled to receive the Servicer Fee. The Servicer Fee shall be paid monthly,
commencing on the Initial Payment Date and terminating on the first to occur of
(i) the receipt of the last Scheduled Payment and related Residual Proceeds with
respect to the last remaining Contract, (ii) the receipt of Recoveries with
respect to the last remaining Contract, or (iii) the date on which the Notes are
paid in full. The Servicer Fee shall be paid to the Servicer at the times and in
the priority as set forth in the Indenture. The Servicer shall pay all expenses
incurred by it in connection with its servicing activities hereunder, including,
without limitation, payment of the fees and disbursements of the Independent
Accountants, payment of expenses incurred in connection with distributions and
reports to the Trustee and the Noteholders and shall not be entitled to
reimbursement for such expenses; provided, however, in accordance with Section
12.02 of the Indenture, that the Servicer will be entitled to prompt
reimbursement from the Issuer for reasonable costs and expenses incurred by the
Servicer (including reasonable attorney's fees and out-of-pocket expenses) in
connection with the realization, attempted realization or enforcement of rights
and remedies upon Defaulted Contracts, from amounts received as Recoveries from
any Defaulted Contracts.
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Section 3.10. Substitution or Purchase of Contracts and Receivables. (a)
Except with respect to an Upgrade, the Servicer shall not allow termination of a
Contract prior to the scheduled expiration date unless the Obligor prepays the
entire Contract in full or unless the Issuer has (i) pledged to the Trustee a
Substitute Receivable and the Issuer's interest in the Related Security under
the related Substitute Contract, and delivered to the Trustee the original
executed counterpart of such Substitute Contract or (ii) purchased such
Receivable and the Issuer's interest in the Related Security from the Trustee by
remittance of the Purchase Price to the Servicer for deposit in the Local Bank
Account in accordance with Section 3.03(a) hereof; provided, further, that
purchases and substitutions of Receivables pursuant to this subparagraph (a)
shall comply with the requirements of Section 4.03 of the Indenture and the
criteria set forth in Section 3.04 of the Receivables Purchase Agreement.
(b) The Servicer shall permit the Issuer to (i) purchase the Receivable
related to any Defaulted Contract or Delinquent Contract by remittance by the
Issuer to the Servicer for deposit in the Local Bank Account in accordance with
Section 3.03(a) hereof or (ii) substitute for the Receivable related to any
Defaulted Contract or Delinquent Contract a Substitute Receivable and the
Issuer's interest in the Related Security under the related Substitute Contract,
upon the delivery to the Trustee of the original executed counterpart of the
Substitute Contract; provided that, purchases and substitutions of Receivables
pursuant to this subparagraph (b) shall comply with the requirements of Section
4.03 of the Indenture and the criteria set forth in Section 3.04 of the
Receivables Purchase Agreement.
(c) Notwithstanding any other provision contained in this Agreement,
the Servicer shall not, with respect to a Defaulted Contract, negotiate or enter
into a new contract with the Obligor relating to Vacation Credits, Fractional
Interests or the Obligor's obligations under such Defaulted Contract unless the
Issuer has repurchased or made a substitution for the Receivable related to such
Defaulted Contract in the manner set forth in subsection (b) hereof.
(d) In the event that Trendwest is required, as a result of the breach
by it of certain representations or warranties, to repurchase or substitute a
Contract pursuant to Section 3.03 of the Receivables Purchase Agreement, the
Servicer shall permit such repurchase or substitution in accordance with the
terms of Sections 3.03 and 3.04 thereof.
(e) Once the Purchase and Substitution Limit is reached, Trendwest may,
at its option, purchase, in its own right and not as Servicer hereunder, the
Vacation Credits relating to a Defaulted Contract at a price equal to 25% of the
initial principal balance of the related Contract. On such Determination Date,
Trendwest shall, or, if Trendwest is not the Servicer, shall cause the Servicer
to, immediately deposit the proceeds of such sale into the Local Bank Account,
and such proceeds shall be deemed to be a collection of principal with respect
to such Contract.
(f) Prior to the substitution of any Contract hereunder, the Servicer
shall review its records and determine that the Substitute Contract is an
Eligible Contract. If there are any Liens or other interests in a contract that
is proposed to be a Substitute Contract, such Contract shall not become a
Substitute Contract until all such interests have been terminated.
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ARTICLE 4
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01. Monthly Servicer's Reports. No later than 2:00 p.m., New
York time, on each Determination Date, the Servicer shall deliver to the Issuer,
the Initial Purchaser, the Trustee, each Noteholder and the Rating Agencies the
Monthly Servicer's Report in the form attached as Exhibit A hereto with respect
to the activity in the immediately preceding Due Period. The determination by
the Servicer of such amounts shall, in the absence of manifest error, be deemed
to be presumptively correct and the Trustee shall be protected in relying upon
the same without any independent check or investigation. In the course of
preparing the Monthly Servicer's Report, the Servicer shall seek direction from
the Issuer as to remittance of the funds to be paid to the Issuer after all
other distributions in accordance with the Indenture. Contracts and Receivables
which have been substituted for or purchased by Trendwest or the Issuer shall be
identified by the related Obligor number. On each Determination Date, the
Servicer shall deliver to the Trustee, in the form of a computer disk or tape or
via electronic transmission in a format acceptable to the Trustee, containing
all the information in the Servicer's electronic files regarding each of the
Receivables as well as any additional information reasonably requested by the
Trustee prior to the related Payment Date.
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default. (a) The Servicer (or the successor Servicer if the initial
Servicer is no longer the Servicer (provided, however, that if Wells Fargo is
the successor Servicer, it shall only be required to deliver items (i), (v) and
(vi) below, and Trendwest shall be required to deliver items (ii), (iii) and
(iv) with respect to itself and the Issuer)) will deliver, or cause to be
delivered, to the Trustee, the Initial Purchaser, each Holder and the Rating
Agencies (and, upon the request of any Noteholder, to any prospective transferee
of any Note):
(i) within 120 days after the end of each fiscal year of each
Reported Company, a copy of such Reported Company's Financial
Statements, all in reasonable detail and accompanied by an opinion of a
firm of independent certified public accountants (which shall be (i)
KPMG LLP or, with respect to WorldMark, Molatore, Peugh, McDaniel,
Scroggin & Co. LLP, (ii) a legal successor thereto, (iii) a nationally
recognized accounting firm) stating that such financial statements
present fairly the financial condition of such Reported Company (or, in
the case of a successor Servicer, such successor Servicer's financial
condition) and have been prepared in accordance with generally accepted
accounting principles consistently applied (except for changes in
application in which such accountants concur), and that the examination
of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such
other auditing procedures as were considered necessary in the
circumstances;
(ii) within 60 days of the end of each fiscal quarter,
unaudited versions of each Reported Company's consolidated balance
sheet, income statement and cash flow statement;
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(iii) with the Issuer's, the Servicer's and Trendwest's (if
Trendwest is not the Servicer) Financial Statements delivered pursuant
to subsections (a)(i) and (a)(ii) above, each of the Issuer, the
Servicer and Trendwest (if Trendwest is not the Servicer) will deliver
an Officer's Certificate stating that such officer has reviewed the
relevant terms of the Indenture, the Receivables Purchase Agreement and
this Agreement and has made, or caused to be made, under such officer's
supervision, a review of the transactions and conditions of such
Reported Company during the period covered by such Reported Company's
Financial Statements then being furnished, that the review has not
disclosed the existence of any Default or Event of Default under the
Indenture or any Servicer Default or Servicer Event of Default or, if a
Default or Event of Default under the Indenture or a Servicer Default
or a Servicer Event of Default exists, describing its nature, and the
Issuer, with respect to a Default or Event of Default, or the Servicer,
with respect to a Servicer Default or a Servicer Event of Default,
describing what action such Person has taken and is taking with respect
thereto, and that on the basis of such review the officer signing such
certificate is of the opinion that during such period the Servicer has
serviced the Contracts in compliance with the procedures hereof except
as disclosed in such certificate;
(iv) with each Reported Company's Financial Statements
delivered pursuant to subsections (a)(i) and (a)(ii) above, each
Reported Company shall deliver an Officer's Certificate stating that
such financial statements present fairly the financial condition of
such Reported Company;
(v) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default or a Servicer
Event of Default hereunder, a Default or an Event of Default under the
Indenture or Receivables Purchase Agreement, or a Trigger Event under
the Indenture, a written notice describing its nature and period of
existence and what action the Servicer is or proposes to take with
respect thereto;
(vi) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending material
investigation, of it, the Club or the Issuer by any
governmental authority or agency, or
(B) any pending or proposed court or administrative
proceeding which involves or may involve the possibility of
materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of
the Servicer, the Club or the Issuer,
a written notice specifying the nature of such investigation or
proceeding and what action the Servicer is taking or proposes to take
with respect thereto and evaluating its merits; and
(vii) with reasonable promptness any other data and information
which may be reasonably requested from time to time, including without
limitation any information required to be made available at any time to
any prospective transferee of any Notes in order to satisfy the
requirements of Rule 144A under the Securities Act of 1933, as amended.
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(b) On or before each April 30, so long as any of the Notes are
outstanding, the Servicer shall furnish to the Trustee an Officer's Certificate
either stating that such action has been taken with respect to the recording,
filing, and rerecording and refiling of any financing statements and
continuation statements as necessary to maintain the interest of the Trustee
created by the Indenture and the Issuer created Receivables Purchase Agreement
with respect to the Trust Estate and reciting the details of such action or
stating that no such action is necessary to maintain such interest. Such
Officer's Certificate shall also describe the recording, filing, rerecording and
refiling of any financing statements and continuation statements that will be
required to maintain the interest of the Trustee in the Trust Estate until the
date such next Officer's Certificate is due.
(c) On a quarterly basis, the Servicer shall cause the Independent
Accountants to review the information provided by the Servicer in each Monthly
Servicer's Report in such quarter indicating the number of Vacation Credits that
have been created and the number of Vacation Credits sold to WorldMark owners.
On or prior to April 15 of each year, beginning in 2003, the Servicer shall
cause the Independent Accountants to audit such reporting for the prior fiscal
year. The Servicer shall cause delivery of each such report to the Issuer, the
Trustee and the Initial Purchaser and the Rating Agencies.
Section 4.03. Independent Accountants' Reports. (a) Within thirty (30)
days after the Prefunding Termination Date, the Servicer shall, at its expense,
cause the Independent Accountants to prepare a report, a form of which is
attached as Exhibit C hereto (which report shall also include as well the
additional procedure of comparing the actual aging of the random sample
portfolio to the aging number provided by the Custodian's system), to the effect
that such Independent Accountants have reviewed a statistically significant
random sample (at the 95% confidence level) of the Custodian Files and that such
reviewed Custodian Files are in the possession of the Custodian and properly
accounted for in the Custodian's records.
(b) For each fiscal year (commencing with the fiscal year ending
December 31, 2001), the Servicer at its expense shall cause the Independent
Accountants (who may also render and deliver other services to the Servicer and
its Affiliates) to prepare a report that shall include the information set forth
in the report set forth in paragraph (a) of this Section 4.03 and which shall
also include a report addressed to the Servicer, the Trustee, Initial Purchaser
and the Noteholders as of the close of such year, to the effect that the
Independent Accountants have (i) compared the information contained in the
Monthly Servicer's Reports delivered for a random three-month period during the
relevant period with information contained in the accounts and records for such
period, and, where applicable, on the basis of such procedures and comparison,
report matters which come to the Independent Accountants' attention to indicate
that the information contained in the Monthly Servicer's Reports does not
reconcile with the information contained in the Servicer's accounts and records
and (ii) compared, as of the last day of such fiscal year, the number of
Vacation Credits sold to WorldMark owners to the number of Vacation Credits that
have been created to confirm that Trendwest has not sold more Vacation Credits
than it has created. If any letter delivered pursuant to this Section 4.03
(commencing with the letter relating to the fiscal year ending December 31,
2001) discloses such exceptions, the Servicer at its expense shall cause the
Independent Accountants to deliver an agreed-upon procedures letter addressed to
the Servicer, the Trustee and the Noteholders for each subsequent three-month
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period. Such obligation shall continue until the Independent Accountants deliver
a letter relating to a three-month period that does not disclose any such
exceptions. Thereafter, the Servicer shall cause a letter to be delivered
relating to each fiscal year in accordance with the first sentence of this
Section 4.03. The Servicer shall deliver to the Trustee a copy of any such
reports within 90 days of the close of the relevant period.
Section 4.04. Access to Certain Documentation and Information. (a) The
Servicer shall provide to the Trustee or any Noteholder and their duly
authorized representatives, attorneys or accountants access to any and all
documentation and to any existing data processing systems (including, but not
limited to, any data that can reasonably be generated therefrom) regarding the
Trust Estate (including the Contract Schedule) that the Servicer may possess,
such access being afforded without charge but only upon reasonable request and
during normal business hours so as not to interfere unreasonably with the
Servicer's normal operations or customer or employee relations, at offices of
the Servicer designated by the Servicer. If a Servicer Event of Default or a
Trigger Event has occurred, the reasonable costs of providing the foregoing
shall be borne by the Servicer; otherwise, the Person seeking the foregoing
shall pay its, his or her own expenses relating to the foregoing.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by Noteholders and
the Trustee a list of all Contracts the interests in which are then held as a
part of the Trust Estate, together with a reconciliation of such list to that
set forth in the Contract Schedule and each of the Monthly Servicer's Reports,
indicating the cumulative addition and removal of the Issuer's interest in the
Contracts from the Trust Estate.
(c) The Servicer will maintain accounts and records as to each
respective Contract serviced by the Servicer that are accurate and sufficiently
detailed as to permit (i) the reader thereof to know as of the most recent
Calculation Date the status of such Contract including any payments, Residual
Proceeds and Recoveries received or owing (and the nature of each) thereon and
(ii) the reconciliation between payments, Residual Proceeds or Recoveries on (or
with respect to) each Contract and the amounts from time to time deposited in
the Collection Account in respect of such Contract or Mortgage Loan, as
applicable.
(d) The Servicer will maintain all of its computerized accounts and
records so that, from and after the time of the acquisition of an interest in
the Assets by the Issuer, the Servicer's accounts and records (including any
back-up computer archives) that refer to any Contract, Receivable or Related
Security indicate clearly that the Contracts and Receivables are owned by the
Issuer and are pledged, together with the Issuer's interest in the Related
Security, to the Trustee for the benefit of the Noteholders. Indication of the
Trustee's interest in a Receivable will be deleted from or modified on the
Servicer's accounts and records when, and only when, the Receivable or related
Contract has been paid in full, replaced with a Substitute Contract or purchased
by Trendwest or the Issuer or assigned to the Servicer pursuant to this
Agreement, as the case may be.
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(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure to provide information otherwise
required by this Section 4.04 as a result of such observance by the Servicer,
shall not constitute a breach of this Section 4.04.
(f) All information (that is not public information) obtained by the
Trustee or any Noteholder regarding any Reported Company (pursuant to Section
4.02 or otherwise), the Obligors and the Contracts whether upon exercise of its
rights under this Section 4.04 or otherwise, shall be maintained by the Trustee
and the Noteholder, as applicable, in confidence in accordance with procedures
adopted by the Trustee or such Noteholder, as applicable, in good faith to
protect such confidential information; provided that the Trustee and any
Noteholder may deliver or disclose such confidential information to (i) their
directors, officers, trustees, managers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the exercise of
the rights and obligations of the Trustee under the Transaction Documents or the
administration of the investment represented by the Notes), (ii) their financial
advisors and other professional advisors who agree to hold confidential such
information substantially in accordance with the terms of this Section 4.04(f),
(iii) any other holder of any Note, (iv) any Institutional Investor to which any
Noteholder sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such confidential information to be bound by the provisions of this Section
4.04(f)), (v) any federal or state regulatory authority having jurisdiction over
the Trustee or any Noteholder, (vi) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agencies that requires access to information about the Noteholders' investment
portfolio, (vii) the Rating Agencies or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (w) to effect compliance
with any law, rule, regulation or order applicable to the Trustee or any
Noteholder, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which the Trustee or any Noteholder is a party
or (z) if an Event of Default has occurred and is continuing, to the extent the
Trustee or any Noteholder may reasonably determine such delivery and disclosure
to be necessary or appropriate in the enforcement or for the protection of the
rights and remedies under the Notes and the Transaction Documents.
Section 4.05. Trustee to Cooperate. Upon payment (including through
application of any prepayment) in full of any Contract the Servicer will notify
the Trustee by written certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payments in full which are required to be deposited in the Local Bank Account
pursuant to Section 3.03 hereof have been so deposited) of a Servicing Officer
and shall request delivery of such Contract to the Servicer in accordance with
Section 1.3 of the Custodian Agreement. Upon receipt of such delivery request,
the Custodian shall, within 7 days of such request by the Servicer, release such
Contract to the Servicer in accordance with the Custodian Agreement. Upon
release of such Contract, the Servicer is authorized to execute an instrument in
satisfaction of such Contract and to do such other acts and execute such other
documents as it deems necessary to discharge the Obligor thereunder and, if
applicable, release any security interest in the Related Security related
thereto. The Servicer shall determine when a Contract has been paid in full.
Upon the written request of a Servicing Officer and subject to the Trustee's
rights to indemnity contained herein and in the Indenture, the Trustee shall
perform such other acts as reasonably requested in writing by the Servicer and
otherwise cooperate with the Servicer in enforcement of the Noteholders' rights
and remedies with respect to Contracts.
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Section 4.06. Oversight of Servicing. (a) Prior to each Payment Date,
the Trustee shall review the Monthly Servicer's Report related thereto and shall
determine the following:
(i) that such Monthly Servicer's Report is complete on its
face; and
(ii) that the amounts credited to and withdrawn from the
Collection Account and the Reserve Account, as set forth in the records
of the Trustee, are the same as the amount set forth in such Monthly
Servicer's Report.
(b) In the event of any discrepancy between the information set forth
in subparagraph (a) as calculated by the Servicer from that determined or
calculated by the Trustee, the Trustee shall promptly notify the Servicer of
such discrepancy. If within 30 days of such notice being provided to the
Servicer, the Trustee and the Servicer are unable to resolve such discrepancy,
the Trustee shall promptly notify the Holders of the Notes of such discrepancy.
(c) Based solely on the information included in the Contract Schedule
delivered on the Closing Date and the electronic reports provided on each
Payment Date thereafter, the Trustee shall determine that any Substitute
Contracts delivered under Section 3.10 satisfy the Substitution Criterion as
defined in the Receivables Purchase Agreement.
(d) Other than as specifically set forth elsewhere in this Agreement,
the Trustee shall have no obligation to supervise, verify, monitor or administer
the performance of the Servicer and shall have no liability for any action taken
or omitted by the Servicer.
(e) The Trustee shall consult fully with the Servicer as may be
necessary from time to time to perform or carry out the Trustee's obligations
hereunder, including the obligation to choose at any time a successor to the
duties and obligations of the Servicer as servicer under Section 6.02 hereof.
ARTICLE 5
THE SERVICER AND THE ISSUER
Section 5.01. Servicer Indemnification. (a) The Servicer shall indemnify
and hold harmless the Trustee, the Issuer, and the Trust Estate, for the benefit
of the Noteholders, from and against any loss, liability, claim, expense, damage
or injury suffered or sustained to the extent that such loss, liability, claim,
expense, damage or injury arose out of or was imposed by reason of the failure
by the Servicer to perform its duties under this Agreement or are attributable
to errors or omissions of the Servicer related to such duties; provided,
however, that the Servicer shall not indemnify any party to the extent that acts
of fraud, gross negligence or breach of fiduciary duty by such party contributed
to such loss, liability, claim, expense, damage or injury.
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(b) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer has made any indemnity payments to the
Trustee or the Noteholders pursuant to this Section and such party thereafter
collects any of such amounts from others, such party will promptly repay such
amounts collected to the Servicer without interest. The provisions of this
Section 5.01 shall survive any expiration or termination of this Agreement.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer
shall keep in full effect its existence and good standing as a corporation in
the State of its incorporation and will obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to enable the Servicer to perform its
duties under this Agreement, except where the failure to so qualify would not
have a material adverse effect on the Trust Estate or the ability of the
Servicer to perform its duties hereunder; provided, however, that the Servicer
may reincorporate in another State, if to do so would be in the best interests
of the Servicer and would not have a material adverse effect upon the
Noteholders.
(b) The Servicer shall not (i) convey, transfer or lease substantially
all of its assets as an entirety to any Person, or (ii) merge or consolidate
with another Person, unless such Person or the merged or consolidated entity
acquires substantially all the assets of the Servicer, as an entirety and
executes and delivers to the Issuer and the Trustee an agreement, in form and
substance reasonably satisfactory to the Issuer and the Trustee, which contains
an assumption by such Person or entity of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Servicer, under this Agreement; provided that nothing herein shall prevent the
Servicer from selling contracts and receivables which are not Assets pursuant to
a receivables financing.
Section 5.03. Limitation on Liability of the Servicer and Others. Except
as provided in Section 5.01, the Servicer, and any of the officers, directors,
employees or agents of the Servicer shall not be under any liability for any
action taken or for refraining from the taking of any action by the Servicer in
its capacity as Servicer pursuant to this Agreement; provided, however, that
this provision shall not protect the Servicer or any such Person against any
liability which would otherwise be imposed by reason of willful misconduct, bad
faith or negligence (which includes negligence with respect to the duties of the
Servicer explicitly set forth in this Agreement) in the performance of its
duties hereunder. The Servicer and any officer, director, employee or agent of
the Servicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person with respect to any matters
arising hereunder. No implied covenants or obligations shall be read into the
Servicing Agreement against the Servicer. In the event the Servicer performs any
activities beyond the requirements of this Agreement, it shall have the option
but will not be required to perform such activities in the future.
Section 5.04. Servicer Not to Resign. (a) The Servicer shall not resign
from the duties and obligations hereby imposed on it by this Agreement except
upon a determination by the Board of Directors of the Servicer that by reason of
change in applicable legal requirements, with which the Servicer cannot
reasonably comply, the continued performance by the Servicer of its duties under
this Agreement would cause it to be in violation of such legal requirements,
said determination to be evidenced by a resolution from the appropriate Board of
Directors to such effect, accompanied by an Opinion of Counsel to such effect
and reasonably satisfactory to the Trustee.
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(b) No such resignation shall become effective until a successor
Servicer, acceptable to the Trustee, the Rating Agencies and to Holders of not
less than 51% in aggregate principal amount of the Outstanding Notes of the
Controlling Class, shall have assumed the responsibilities and obligations of
the Servicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties and
obligations of the Servicer under this Agreement shall continue until this
Agreement shall have been terminated as provided in Section 8.01 hereof, and
shall survive the exercise by the Issuer or the Trustee of any right or remedy
under this Agreement, or the enforcement by the Issuer, the Trustee or any
Noteholder of any provision of the Notes or this Agreement.
Section 5.05. Issuer Indemnification. The Issuer shall indemnify and
hold harmless the Servicer (but solely from the amounts to be distributed as set
forth in Sections 12.02(d)(xviii), 12.02(e)(xiv) and 12.03(d)(ii) of the
Indenture) from and against any loss, liability, expense, damage or injury
suffered or sustained by the Servicer, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other costs and
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, which arises out of the Servicer's activities
hereunder; provided, however, that the Issuer shall not indemnify the Servicer
if the Servicer's activities constituted fraud, willful misconduct, negligence
(which includes negligence with respect to the duties of the Servicer which are
explicitly set forth in this Agreement) or breach of fiduciary duty by the
Servicer for any amounts for which the Servicer is obligated to indemnify the
Issuer or other Persons pursuant to Section 5.01 hereof.
ARTICLE 6
SERVICING TERMINATION
Section 6.01. Servicer Events of Default. (a) Any of the following acts
or occurrences shall constitute a Servicer Event of Default:
(i) any failure by the Servicer (A) to deliver to the Local
Bank for deposit in the Local Bank Account or (B) to deliver or cause
to be delivered to the Trustee for deposit in the Collection Account,
any proceeds or payments received from an Obligor or in respect of the
Trust Estate and required to be so delivered under the terms of the
Indenture and this Agreement that continues unremedied until 2:00 p.m.,
New York time, on the second successive Business Day following such
failure; or provided, however, that the Trustee, upon receiving actual
knowledge of such failure, shall give the Servicer prompt written,
telecopied or telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice to the
Servicer shall not prevent the occurrence of a Servicer Event of
Default; or
(ii) any failure by the Servicer to deliver a Monthly
Servicer's Report pursuant to Section 4.01 hereof that continues
unremedied until 2:00 p.m., New York time, the following Business Day;
provided, however, that if the Trustee has actual knowledge that the
Servicer has not delivered such Monthly Servicer's Report by 2:00 p.m.,
New York time, on a Determination Date, the Trustee shall give the
19
Servicer written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to deliver
such notice to the Servicer shall not prevent the occurrence of a
Servicer Event of Default; or
(iii) any failure by the Servicer to remit any Purchase Price
received by it to the Trustee that continues unremedied until 5:00
p.m., New York time, the following Business Day; provided, however,
that if the Servicer has not remitted any Purchase Price received by it
to the Trustee by 3:00 p.m., New York time, on the Determination Date
and the Trustee has actual knowledge that such Purchase Price has not
been paid, the Trustee shall give the Servicer prompt written,
telecopied or telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice to the
Servicer shall not prevent the occurrence of a Servicer Event of
Default; or
(iv) any failure by the Servicer to make remittances (other
than a remittance of Purchase Price referred to in clause (iii) above)
or deliver notices pursuant to Section 3.03 hereof, that continues
unremedied until 2:00 p.m., New York time, of the second successive
Business Day; or
(v) any failure on the part of the Servicer duly to observe
or perform any other covenants or agreements of the Servicer set forth
in this Agreement or the Indenture or any representation or warranty of
the Servicer set forth in Section 2.01 of this Agreement shall prove to
be incorrect in any material respect, which failure or breach continues
unremedied for a period of 30 days after the date on which the Servicer
becomes aware of such failure or breach, or receives written notice of
such failure or breach; or
(vi) any assignment by the Servicer to a delegate of its
duties or rights under this Agreement or except as specifically
permitted hereunder, or any attempt to make such an assignment; or
(vii) the entry of a decree or order for relief by a court
having jurisdiction in respect of the Servicer or a petition against
the Servicer in an involuntary case under any federal bankruptcy laws,
as now or hereafter in effect, or any other present or future federal
or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Servicer or for any substantial part of
its property, or ordering the winding up or liquidation of the affairs
of the Servicer and the continuance of any such decree or order
unstayed and in effect, or failure for such petition to be dismissed,
for a period of 60 consecutive days; or
(viii) the commencement by the Servicer of a voluntary case
under any federal bankruptcy laws, as now or hereafter in effect, or
any other present or future federal or state bankruptcy, insolvency,
reorganization or similar law, or the consent by the Servicer to the
appointment of or taking possession by a conservator, receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
20
official in any insolvency, readjustment of debt, marshaling of assets
and liabilities, bankruptcy or similar proceedings of or relating to
the Servicer relating to a substantial part of its property, or the
making by the Servicer of an assignment for the benefit of creditors,
or the failure by the Servicer generally to pay its debts as such debts
become due or if the Servicer shall admit in writing its inability to
pay their debts as they become due, or the taking of corporate action
by the Servicer in furtherance of any of the foregoing; or
(ix) the stockholders' equity of the Servicer and its
consolidated subsidiaries, determined in accordance with generally
accepted accounting principles, as would be shown on a consolidated
balance sheet for such Persons, is below $50,000,000; or
(x) the occurrence of a Trigger Event.
(b) If a Servicer Event of Default shall have occurred and be
continuing, the Trustee may, and shall upon written direction of the Holders of
Notes representing not less than 66-2/3% in principal amount of the Outstanding
Notes of the Controlling Class, by notice (the "Servicer Termination Notice")
given in writing to the Servicer, terminate all, but not less than all, of the
rights and obligations (except as expressly provided herein) of the Servicer
under this Agreement. Notwithstanding the foregoing, a delay in or failure of
performance under Sections 6.01(a)(ii) or 6.01(a)(v) hereof for a period of not
more than 30 days past the applicable cure period shall not constitute a
Servicer Event of Default if such delay or failure could not have been prevented
by the exercise of reasonable diligence by the Servicer and such delay or
failure was caused by acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes; provided, however, that in any event,
such delay or failure shall constitute a Servicer Event of Default if it
continues unremedied for a period of 30 days past the applicable cure period.
The preceding sentence shall not relieve the Servicer from using its best
efforts to perform its obligations in a timely manner in accordance with the
terms of this Agreement, and the Servicer shall provide the Trustee, the Issuer
and the Noteholders with prompt notice of such failure or delay by it, together
with a description of its efforts to so perform its obligations.
(c) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer under this Agreement shall pass
to and be vested in the Trustee as successor Servicer unless another successor
Servicer is appointed pursuant to Section 6.02 hereof; any successor Servicer is
hereby authorized and empowered to execute and deliver, on behalf of such
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer of the Loan Documents, or otherwise. The Servicer agrees
to cooperate with the Trustee and the successor Servicer in effecting the
termination of the responsibilities and rights of the Servicer hereunder,
including, without limitation, the transfer to the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the
Servicer for deposit, or have been deposited by the Servicer or thereafter
received with respect to the Trust Estate. To assist the successor Servicer in
enforcing all rights under the Contracts, the outgoing Servicer, at its own
expense (including, without limitation, any costs or expenses associated with
the complete transfer of all servicing data and the completion, correction or
manipulation of such servicing data as may be required by the successor Servicer
to correct any errors or insufficiencies in the servicing data or otherwise to
enable the successor Servicer to service the Contracts properly and effectively
21
to the successor Servicer in such form as the successor Servicer may reasonably
request), shall transfer its records (electronic and otherwise) relating to the
Trust Estate and shall transfer the related Loan Documents (to the extent not
held by the Trustee) and all other records, correspondence and documents
relating to the Trust Estate that it may possess to the successor Servicer in
the manner and at such times as the successor Servicer shall reasonably request.
Section 6.02. Appointment of Successor Servicer. (a)(i) If the Servicer
resigns as Servicer pursuant to Section 5.04 hereof or is terminated as Servicer
pursuant to Section 6.01 hereof, the Trustee shall without further action by the
parties hereto become the successor Servicer and shall complete its transition
of servicing within 90 days of such date; provided, however, at any time the
Holders of Notes representing not less than 66-2/3% in principal amount of the
Outstanding Notes of the Controlling Class may appoint a successor Servicer
other than the Trustee.
(ii) Except as set forth in Section 6.02(a)(iii), the successor Servicer
shall be the successor in all respects to the Servicer in its capacity as
Servicer under this Agreement, and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Servicer by the terms and provisions hereof;
provided, however, that any such successor shall not be liable for any acts or
omissions of such outgoing Servicer or for any breach by the outgoing Servicer
of any of its representations and warranties contained herein or in any related
document or agreement. Such successor Servicer may subcontract with another firm
to act as subservicer so long as such successor Servicer remains fully
responsible and accountable for performance of all obligations of the Servicer
on and after the time such Servicer receives the Servicer Termination Notice.
Such successor Servicer shall be entitled to the Servicer Fee and any other
servicing compensation in the form of assumption fees, late payment charges or
otherwise that accrue in connection with acting as Servicer hereunder.
(iii) If Wells Fargo is the successor Servicer, it shall not be bound by
the provisions of Section 2.01(a), (g) or (h), or Section 2.02(c) hereof, nor
shall Wells Fargo, as successor Servicer be obligated or responsible for
reselling or repurchasing any Related Security pursuant to any Transaction
Document; provided, that Wells Fargo as successor Servicer shall make reasonable
efforts to contract with a third party to resell any Related Security on behalf
of the Issuer.
(b) Each of the Servicer, the Issuer, the Trustee and any successor
Servicer, shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession. Upon any succession, such successor
Servicer shall notify the Obligors that it has been appointed Servicer under
this Agreement with respect to the Trust Estate. Neither the Trustee nor any
other successor Servicer shall be held liable by reason of any failure to make,
or any delay in making, any distribution hereunder or any portion thereof caused
by (i) the failure of the Servicer to deliver, or any delay in delivering, cash,
documents or records to it, or (ii) restrictions imposed by an regulatory
authority having jurisdiction over the Servicer hereunder.
Section 6.03. Notification to Noteholders. The Servicer shall promptly
notify the Issuer, the Trustee and the Rating Agencies of any Servicer Event of
22
Default upon actual knowledge thereof by an officer of the Servicer. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article 6, the Trustee shall give prompt written notice thereof to the
Noteholders at their respective addresses appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Trustee shall, at the
direction of the Holders of Notes representing not less than 66-2/3% in
principal amount of the Outstanding Notes of the Controlling Class, on behalf of
all Noteholders, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences, other than a default with respect to
required deposits and payments in accordance with Article 3 or a default of the
type set forth in clause (vii) or (viii) of Section 6.01(a) hereof, which waiver
shall require the consent of each Noteholder. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly waived.
Section 6.05. Effects of Termination of Servicer. (a) The predecessor
Servicer shall remit or cause to be transmitted directly to the successor
Servicer in the same form in which received, any amounts held by such
predecessor Servicer (properly endorsed where required for such successor to
collect them) received as payments upon or otherwise in connection with the
Trust Estate within one Business Day of receipt thereof. All payments received
by the predecessor Servicer shall be held in trust by it until such remittance
to the successor Servicer.
(b) After the delivery of a Servicer Termination Notice, the
predecessor Servicer shall have no further obligations with respect to the
management, administration, servicing, enforcement, custody or collection of the
Contracts and Mortgage Notes, and the successor Servicer shall have all of such
obligations, except that such predecessor Servicer will transmit any payments or
proceeds that such predecessor Servicer may receive pursuant to any Contract,
Mortgage Note or otherwise in accordance with Section 6.05(a) herein. Such
outgoing Servicer's indemnification obligations pursuant to Section 5.01 hereof
will survive the termination of such Servicer but will not extend to any acts or
omissions of a successor Servicer.
Section 6.06. No Effect on Other Parties. (a) Upon any termination of
the rights and powers of the Servicer pursuant to Section 6.01, or upon any
appointment of a successor to such Servicer, all the rights, powers, duties and
obligations of Trendwest under this Agreement, the Indenture and the Receivables
Purchase Agreement, other than Trendwest's rights, powers, duties and
obligations as Servicer therein, shall remain unaffected by such termination or
appointment and shall remain in full force and effect thereafter.
Section 6.07. Continued Errors. Notwithstanding anything contained
herein to the contrary, any successor Servicer is authorized to accept and rely
on all of the accounting, records (including computer records) and work of the
predecessor Servicer relating to the contract (collectively, the "Predecessor
Servicer Work Product") without any audit or other examination thereof, and such
successor Servicer shall have no duty, responsibility, obligation or liability
for the acts and omissions of any predecessor Servicer. If any error,
inaccuracy, omission or incorrect or non-standard practice or procedure
(collectively, "Errors") exists in any Predecessor Servicer Work Product and
such Errors make it more difficult to service or should cause or contribute to a
successor Servicer making or continuing any Errors (collectively, "Continued
Errors"), such successor Servicer shall have no duty or responsibility for such
Continued Errors. In the event that such successor Servicer becomes aware of
23
Errors or Continued Errors, such successor Servicer shall use commercially
reasonable efforts to reconstruct and reconcile such data to correct such Errors
and Continued Errors and to prevent future Continued Errors. A successor
Servicer shall be entitled to recover its costs thereby as transition expenses
in accordance with Section 12.02(d) or 12.02(e), as applicable, of the
Indenture.
ARTICLE 7
[RESERVED]
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of the Servicing Agreement. (a) Absent a
termination pursuant to Section 6.01, the respective duties and obligations of
the Servicer, the Issuer and the Trustee created by this Agreement shall
terminate upon the discharge of the Indenture in accordance with its terms; and
the respective duties and obligations of the Trustee shall terminate with
respect to the Trustee in the event the Trustee resigns or is replaced under
Section 7.09 of the Indenture; provided, however, that no resignation or removal
of the Trustee and no appointment of a successor Trustee shall become effective
until the acceptance of appointment by the successor Trustee under Section 7.10
of the Indenture. Upon the termination of this Agreement pursuant to this
Section 8.01(a), the Servicer shall pay all monies with respect to the
Receivables and the Related Security held by the Servicer, as the case may be,
and to which the Servicer is not entitled, to the Issuer or upon the Issuer's
order. The Servicer's indemnification obligations pursuant to Section 5.01
hereof will survive the termination of this Agreement.
(b) This Agreement shall not be automatically terminated as a result of
an Event of Default under the Indenture or any action taken by the Trustee
thereafter with respect thereto, and any liquidation or preservation of the
Trust Estate by the Trustee thereafter shall be subject to the rights of the
Servicer to service the Receivables and to collect servicing compensation as
provided hereunder.
Section 8.02. Amendments. (a) This Agreement may be amended from time
to time by the Issuer and the Servicer, with the consent of the Trustee, and the
Holders of not less than 66-2/3% in principal amount of the Outstanding Notes of
the Controlling Class for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement; provided,
however, that no such amendment shall, without the consent of each affected
Noteholder (i) alter the priorities with which any allocation of funds shall be
made under this Agreement; (ii) permit the creation of any lien on the Trust
Estate (other than the lien of the Indenture) or any portion thereof or deprive
any such Noteholder of the benefit of this Agreement with respect to the Trust
Estate or any portion thereof; (iii) modify any provision herein relating to the
voting percentage of Noteholders necessary to grant consent or give direction,
(iv) modify this Section 8.02 or Sections 5.02 or 5.04 hereof, (v) cause the
downgrade of the then current ratings assigned by the Rating Agencies with
respect to the Notes.
24
(b) Promptly after the execution of any amendment (of this Agreement or
any other Transaction Document), the Servicer shall send to the Trustee, the
Rating Agencies and each Holder of the Notes a conformed copy of each such
amendment.
(c) It shall be necessary, in any consent of Noteholders under this
Section 8.02, to approve the particular form of any proposed amendment. The
manner of obtaining such consent and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Trustee may prescribe.
(d) Any amendment or modification effected contrary to the provisions
of this Section 8.02 shall be void.
Section 8.03. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York without regard to
conflict of laws principles and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
Section 8.04. Notices, etc., to Trustee, Issuer and Servicer. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other document provided or permitted by this Agreement to be made
upon, given or furnished to, or filed with any party hereto shall be sufficient
for every purpose hereunder if in writing and telecopied or mailed, first-class
postage prepaid and addressed to the appropriate address below:
(a) to the Trustee at Sixth Street and Marquette Avenue, MAC N9311-161,
Minneapolis, Minnesota 55479 (facsimile number (612) 667-3539) or at any other
address previously furnished in writing to the Issuer and the Servicer; or
(b) to the Issuer at TRI Funding V, Inc., 3250 Lakeport Blvd., Klamath
Falls, Oregon 97601 (facsimile number (541) 885-7454), Attention: Chief
Financial Officer, or at any other address previously furnished in writing to
the Trustee, the Noteholders and the Servicer by the Issuer; or
(c) to the Servicer at Trendwest Resorts, Inc., 9805 Willows Road,
Redmond, Washington 98052 (facsimile number (425) 498-3050), Attention: Chief
Financial Officer, or at any other address previously furnished in writing to
the Trustee, the Noteholders and the Issuer; or
(d) to Fitch at One State Street Plaza, New York, New York 10004
(facsimile (212) 514-9879), Attention: Asset-Backed Securities, or at any other
address previously furnished in writing to the Trustee, the Noteholders, the
Servicer and the Issuer; or
25
(e) to Moody's at 99 Church Street, New York, New York 10007,
Attention: Residential Mortgage Pass-Through Monitoring Group, or at any other
address previously furnished in writing to the Trustee, the Noteholders, the
Servicer and the Issuer.
Section 8.05. Notices and Other Documents to Noteholders; Waiver. (a)
Where this Agreement provides for notice to Noteholders of any event, such
notice shall be in writing and sent (i) by telefacsimile if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (ii) by registered or certified mail with
return receipt requested (postage prepaid), or (iii) by a recognized overnight
delivery service (with charges prepaid). Any such notice to a Noteholder or its
nominee must be sent to (i) such Person at the address specified for such
communications in the Note Register, or at such other address as the Noteholder
shall have specified to the Trustee in writing and (ii) if specified, to such
other Person as shall be identified in writing to the Trustee by each Noteholder
or its nominee. Notice under this Section 8.05 will be deemed to be given only
when actually received.
(b) Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(c) Any reports, documents or other communications other than notices
to be sent to Noteholders may be telecopied or mailed, first class postage
prepaid and shall be addressed to the Noteholders and their nominees and
designees, if applicable, as set forth in paragraph (a) above.
Section 8.06. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid, such
provisions shall be deemed severable from the remaining covenants and provisions
of this Agreement, and shall in no way affect the validity or enforceability of
such remaining provisions, the rights of any parties hereto, or the rights of
the Trustee or any Noteholder. To the extent permitted by law, the parties
hereto waive any provision of law which renders any provision of this Agreement
prohibited or unenforceable in any respect.
Section 8.07. Binding Effect. All provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto, and all such provisions shall inure to the benefit of the
Noteholders. This Agreement may not be modified except by a writing signed by
all parties hereto.
Section 8.08. Article Headings and Captions. The article headings and
captions in this Agreement are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof.
Section 8.09. Legal Holidays. In the case where the date on which any
action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
26
Section 8.10. Assignment for Security for the Notes. The Servicer
understands that the Issuer will assign to and grant to the Trustee a security
interest in all of its right, title and interest to this Agreement. The Servicer
consents to such assignment and grant and further agrees that all
representations, warranties, covenants and agreements of the Servicer made
herein shall also be for the benefit of and inure to the Trustee and all Holders
from time to time of the Notes.
Section 8.11. No Assignment of Servicing Agreement. Notwithstanding
anything to the contrary contained herein, except as provided in Sections 5.02
and 5.04 hereof, this Agreement may not be assigned by the Issuer, the Seller or
the Servicer (except with respect to the appointment of a subservicer) without
the prior written consent of the Holders of Notes representing not less than
66-2/3% in principal amount of the Outstanding Notes of the Controlling Class.
Section 8.12. Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one original document.
Section 8.13. Parties Will Not Institute Insolvency Proceedings. During
the term of this Agreement and for one year and one day after the termination
hereof, none of the parties hereto or any Affiliate thereof or any Holder of
Outstanding Notes (and each Holder of Outstanding Notes so agrees by acceptance
of a Note) will file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other proceeding under any federal or state bankruptcy or similar law against
the Issuer.
27
IN WITNESS WHEREOF, the Issuer, Trendwest, the Servicer and the Trustee
have caused this Agreement to be duly executed by their respective officers or
authorized signatories thereunto duly authorized as of the date and year first
above written.
TRI FUNDING V, INC., as Issuer
By
Name:
Title:
TRENDWEST RESORTS, INC., as Servicer and for itself
By
Name:
Title:
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, as
Trustee
By
Name:
Title:
28
EXHIBIT A
FORM OF
MONTHLY SERVICER'S REPORT
A-1
<Page>
EXHIBIT B
PERMITTED CHANGES TO PROPERTY MANAGEMENT AGREEMENT
1. The right of entry into resort units provision of the agreement may be
amended to accommodate emergency situations.
2. The permitted percentage interest that Trendwest has in an entity which
contracts with Trendwest may be decreased.
3. The maximum management fees paid to Trendwest may be decreased.
4. The Advances and Reimbursements provision may be amended so that WorldMark
will reimburse Trendwest for sums which were advanced by Trendwest at
Trendwest's cost rather than at a set interest rate.
5. The provision of the agreement authorizing Trendwest to pay itself its
management fee, reimbursements and authorized expenses may be amended to
require board approval should Trendwest seek reimbursement of expenses in
excess of the budgeted amount for such expenses.
6. The competition provision of the agreement may be amended so that employees
and managers of Trendwest and WorldMark may not in any way obtain or retain
the services of the other's employees for a period of twelve months
following the termination or expiration of the agreement.
7. Information relating to the names and addresses of any person named in the
agreement may be updated as necessary.
B-1
<Page>
EXHIBIT C
FORM OF REPORT OF INDEPENDENT ACCOUNTANTS
C-1