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SERVICING AGREEMENT
among
TRI FUNDING II, INC.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer" or "Trendwest")
and
SAGE SYSTEMS, INC.
("Subservicer")
and
LASALLE NATIONAL BANK, as Trustee
("Trustee")
Dated as of March 1, 1998
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TABLE OF CONTENTS
SECTION HEADING PAGE
ARTICLE 1
DEFINITIONS...................................................................1
Section 1.01. Defined Terms..................................1
ARTICLE 2 SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS.......4
Section 2.01. Representations and Warranties............................4
Section 2.02. Covenants.................................................6
ARTICLE 3 ADMINISTRATION AND SERVICING OF CONTRACTS...............7
Section 3.01. Responsibilities of Servicer..............................7
Section 3.02. Standard of Care..........................................9
Section 3.03. Clearing Account, ACH Payments and Servicer Remittances...9
Section 3.04. Property Management......................................10
Section 3.05. Financing Statements.....................................11
Section 3.06. [Reserved.]..............................................11
Section 3.07. [Reserved.]..............................................11
Section 3.08. No Offset................................................11
Section 3.09. Servicing Compensation...................................11
Section 3.10. Substitution or Purchase of Contracts and Receivables....12
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS...............13
Section 4.01. Monthly Servicer's Reports..................................13
Section 4.02. Financial Statements; Certification as to Compliance; Notice of
Default.....................................................13
Section 4.03. Independent Accountants' Reports.....................15
Section 4.04. Access to Certain Documentation and Information......16
Section 4.05. Trustee to Cooperate.................................18
Section 4.06. Oversight of Servicing...............................18
ARTICLE 5 THE SERVICER, THE SUBSERVICER AND THE ISSUER......20
Section 5.01. Servicer and Subservicer Indemnification....................20
Section 5.02. Corporate Existence; Reorganizations........................20
Section 5.03. Limitation on Liability of the Servicer, the Subservicer and
Others..............................21
Section 5.04 The Servicer and Subservicer Not to Resign......................21
Section 5.05. Issuer Indemnification.........................................22
ARTICLE 6 SERVICING TERMINATION.............................22
Section 6.01. Servicer Events of Default...........................22
Section 6.02. Appointment of Successor Servicer....................25
Section 6.03. Notification to Noteholders..........................25
Section 6.04. Waiver of Past Defaults..............................26
Section 6.05. Effects of Termination of Servicer...................26
Section 6.06. No Effect on Other Parties...........................26
ARTICLE 7 THE SUBSERVICER...................................27
Section 7.01. Representations and Warranties.......................27
Section 7.02. Subservicer Events of Default........................28
Section 7.03. Appointment of Successor Subservicer.................29
Section 7.04. Notification to Noteholders..........................30
Section 7.05. Waiver of Past Defaults..............................30
Section 7.06. Effects of Termination of Subservicer................30
ARTICLE 8 MISCELLANEOUS PROVISIONS..........................31
Section 8.01. Termination of the Servicing Agreement...............31
Section 8.02. Amendments...........................................31
Section 8.03. Governing Law........................................32
Section 8.04. Notices, etc., to Trustee, Issuer, Servicer and
Subservicer..........................................32
Section 8.05. Notices and Other Documents to Noteholders; Waiver...33
Section 8.06. Severability of Provisions...........................33
Section 8.07. Binding Effect.......................................33
Section 8.08. Article Headings and Captions........................33
Section 8.09. Legal Holidays.......................................34
Section 8.10. Assignment for Security for the Notes................34
Section 8.11. No Servicing Assignment..............................34
Section 8.12. Counterparts.........................................34
Section 8.13. Duties of the Parties................................34
Signatures...................................................................35
EXHIBIT A -- Form of Report of Independent Accountants
EXHIBIT B -- Permitted Changes to Property Management Agreement
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SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of March 1, 1998 (the "Agreement"),
by and among TRI FUNDING II, Inc., a Delaware corporation (herein, together with
its permitted successors and assigns, the "Issuer"), TRENDWEST RESORTS, INC., an
Oregon corporation, for itself (together with its successors and assigns,
"Trendwest") as servicer hereunder (herein, together with its permitted
successors and assigns, the "Servicer"), SAGE SYSTEMS, INC., a Washington
corporation, as subservicer hereunder (herein, together with its permitted
successors and assigns, the "Subservicer") and LASALLE NATIONAL BANK, as trustee
(herein, together with its permitted successors and assigns, the "Trustee")
under the Indenture (defined below).
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of March 1, 1998 (as
amended and supplemented from time to time, the "Indenture"), with the Trustee
and the Servicer, pursuant to which the Issuer intends to issue from time to
time in series its Receivables-Backed Notes (collectively, the "Notes").
The Issuer, Trendwest Resorts, Inc. (not as Servicer, but acting on its
own behalf, "Trendwest"), and Trendwest Funding II, Inc., a Delaware corporation
("TFI"), have entered into a Purchase and Sale Agreement, dated as of March 1,
1998 (as amended and supplemented from time to time, the "Sale Agreement"),
providing for, among other things, the sale by TFI to the Issuer of the
Purchased Assets, as defined in the Sale Agreement. Under the terms and
conditions set forth in the Indenture, the Issuer is and will be pledging such
Purchased Assets to the Trustee as security for the Notes. As a precondition to
the effectiveness of the Sale Agreement, the Sale Agreement requires that the
Servicer, the Subservicer, the Issuer and the Trustee enter into this Agreement
to provide for the servicing of the Purchased Assets.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Sale Agreement, and the Servicer and the
Subservicer agree that all covenants and agreements made by the Servicer and the
Subservicer herein with respect to the Purchased Assets shall also be for the
benefit and security of the Trustee and all Holders from time to time of the
Notes. For its services under this Agreement, the Servicer will receive a
Servicer Fee as provided herein and in the Indenture.
ARTICLE 1 DEFINITIONS
Section 1.01. Defined Terms. Except as otherwise specified or as the
context may otherwise require, the following terms have the respective meanings
set forth below for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such terms
and to the masculine, feminine and neuter genders of such terms. Capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned to such terms in the Indenture.
"Clearing Account" shall mean the account established by the
Subservicer at the Clearing Account Bank, into which account collections with
respect to the Contracts will be deposited by the Subservicer.
"Clearing Account Bank" shall mean Commerce Bank of Washington (or an
affiliate thereof), and its successors and assigns.
"Collection Account Bank" shall mean Wells Fargo Bank (or an affiliate
thereof) and its successors or assigns.
"Contract Files" shall have the meaning specified in the Sale Agreement.
"Custodian Agreement" shall mean the Custodian Agreement, dated as of
March 1, 1998, among Sage Systems, Inc., as Custodian, the Trustee, the Issuer
and Trendwest, as amended and supplemented from time to time.
"Custodian Files" shall have the meaning specified in the Sale Agreement.
"Independent Accountants" shall mean KPMG Peat Marwick or another firm
of public accountants of nationally recognized standing (except that, with
respect to Section 4.03, Independent Accountants shall include Molatore, Peugh,
McDaniel, Scroggin & Co. LLP and its successors in interest); provided, that
such firm is independent with respect to the Servicer within the meaning of the
Securities Act of 1933, as amended.
"Institutional Investor" shall have the meaning specified in the Indenture.
"Issuer" shall mean TRI Funding II, Inc., a Delaware corporation and
its permitted successors and assigns.
"Liquidated Receivable" shall mean a Receivable that has been
liquidated pursuant to Section 3.01(b) hereof.
"Monthly Servicer's Report" shall mean the report prepared by the
Servicer for each Series pursuant to Section 4.01 hereof, a form of which is
attached to the related Series Supplement.
"Officer's Certificate" shall mean, for any Person, a certificate
signed by the President, any Vice President, Treasurer or Secretary of such
Person and, in the case of the Prior Issuer, any authorized representative of
the Prior Issuer.
"Opinion of Counsel" shall mean a written opinion of counsel in a form
that is, and from counsel who is, reasonably acceptable to the person requesting
such opinion.
"Prior Issuer" shall mean TRI Funding Company I, L.L.C., a Delaware
limited liability company and its permitted successors and assigns.
"Projected Income" shall mean, with respect to each Due Period, the
amount set forth under the line item "Amount Billed" on the Monthly Servicer's
Report.
"Purchased Assets" shall have the meaning specified in the Sale Agreement.
"Receivables Purchase Agreement" shall mean the Receivables Purchase
Agreement, dated as of the date hereof, among Trendwest, TW Holdings, Inc., the
Prior Issuer and TFI as the same may be amended or modified from time to time,
together with any annexes, appendices, exhibits or schedules thereto and
including the Assignment executed and delivered in connection therewith.
"Remittance Date" shall mean the Business Day immediately preceding
each Payment Date.
"Reported Company" shall mean each of the Issuer, the Subservicer,
WorldMark, Trendwest and its subsidiaries, provided, however, if Trendwest is no
longer acting as Servicer or Sage is no longer acting as Subservicer, then
"Reported Company" shall also mean any successor Servicer or successor
Subservicer, as the case may be, appointed pursuant to this Agreement.
"Reported Company's Financial Statements" shall include each Reported
Company's audited consolidated balance sheet, income statement, statement of
cash flows, auditors opinion letter regarding audited financial statements, all
notes to the audited financial statements and, with respect to Trendwest, a
letter stating that either (i) the auditors have found no material weakness or
(ii) specifying any material weaknesses found by such auditors; Trendwest's and
WorldMark's financial statements shall be audited, but, with respect to any
other Reported Company, if such information is not currently being audited, then
such information may be unaudited.
"Sage" shall mean Sage Systems, Inc., a Washington corporation and its
successors in interest.
"Sale Agreement" shall mean the Purchase and Sale Agreement, together
with any annexes, appendices, exhibits or schedules attached thereto, by and
among TFI, Trendwest and the Issuer dated as of the date hereof, and including
the Assignment and any Subsequent Assignments executed and delivered in
connection therewith.
"Servicer" with respect to each Series shall initially mean Trendwest
Resorts, Inc. until a successor Person shall have become the Servicer pursuant
to the applicable provisions of this Agreement, and thereafter "Servicer" shall
mean such successor Person.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice" means the notice described in Section 6.01
hereof.
"Servicing Officer" shall mean those officers of the Servicer involved
in, or responsible for, the administration and servicing of the Purchased
Assets, as identified on the list of Servicing Officers furnished by the
Servicer to the Trustee and the Noteholders from time to time.
"Subservicer" with respect to each Series shall initially mean Sage
until a successor Person shall have become the Subservicer pursuant to the
applicable provisions of this Agreement, and thereafter "Subservicer" shall mean
such successor Person.
"Subservicer Default" shall mean each of the occurrences or
circumstances which with notice or the lapse of time or both would be a
Subservicer Event of Default under this Agreement.
"Subservicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 7.02 hereof.
"Substitution Criterion" shall have the meaning specified in the Sale
Agreement.
"Substitute Receivable" shall have the meaning specified in the Sale
Agreement.
"TFI" shall mean Trendwest Funding II, Inc., a Delaware corporation,
and its permitted successors and assigns.
"Trustee" with respect to each Series shall initially mean LaSalle
National Bank, until a successor Person shall have become the Trustee pursuant
to the applicable provisions of the Indenture, and thereafter "Trustee" shall
mean such successor Person.
"Upgrade" shall have the meaning specified in the Indenture.
"Upgrade Contract" shall have the meaning specified in the Indenture.
ARTICLE 2 SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties to the Trustee and for the benefit of
the Noteholders as of the Closing Date and each Series Closing Date, which shall
survive the Closing Date and each subsequent Series Closing Date:
(a) Organization and Good Standing. The Servicer has been duly incorporated
and is validly existing in good standing as a corporation under the laws of the
State of Oregon, with requisite corporate power and authority to own its
properties, perform its obligations under this Agreement and the Indenture and
to transact the business in which it is now engaged or in which it proposes to
engage; the Servicer is duly qualified to do business and is in good standing in
each State in which the nature of its business requires it to be so qualified,
except where failure to so qualify would not have a material adverse effect on
the ability of the Servicer to perform its obligations under this Agreement and
the Indenture.
(b) Authorization and Binding Obligation. Each of this Agreement and the
Indenture has been duly authorized, executed and delivered by the Servicer and
constitutes the valid and legally binding obligation of the Servicer enforceable
against the Servicer in accordance with its terms, subject as to enforcement to
any bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(c) No Violation. The entering into of this Agreement and the Indenture and
the performance by the Servicer of its obligations under this Agreement and the
Indenture and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any of the property or assets
of the Servicer pursuant to the terms of any material indenture, mortgage, deed
of trust or other agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject, nor will such
action result in any violation of the provisions of its Articles of
Incorporation or By-laws, or any statute or any order, rule or regulation of any
court or any regulatory authority or other governmental agency or body having
jurisdiction over it or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any court, or any
such regulatory authority or other governmental agency or body is required for
the Servicer to enter into this Agreement and the Indenture.
(d) No Proceedings. There are no proceedings or investigations pending, or
to the knowledge of the Servicer, threatened against or affecting the Servicer
or any subsidiary in or before any court, governmental authority or agency or
arbitration board or tribunal, including but not limited to any such proceeding
or investigation with respect to any environmental or other liability resulting
from the ownership or use of any of the Credits, which, individually or in the
aggregate, involve the possibility of materially and adversely affecting the
properties, business, prospects, profits or condition (financial or otherwise)
of the Servicer and its subsidiaries, or the ability of the Servicer to perform
its obligations under this Agreement or the Indenture. The Servicer is not in
default with respect to any order of any court, governmental authority or agency
or arbitration board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, and (iii) is not in violation in any material respect of any term
of any agreement, charter instrument, bylaw or instrument to which it is a party
or by which it may be bound, which violation or failure to obtain materially
adversely affect the business or condition (financial or otherwise) of the
Servicer and its subsidiaries.
(f) Investment Company. The Servicer is not an investment company which is
required to register under the Investment Company Act of 1940, as amended.
(g) Fidelity Bond. The Servicer has insurance coverage for employee
dishonesty with respect to funds it holds in an amount equal to $500,000 per
occurrence.
(h) Pension Funds. The Servicer does not maintain any pension plans.
Section 2.02. Covenants. (a) The Servicer covenants as to the Purchased
Assets:
(i) The Servicer shall not release or assign any Lien in favor of the
Trustee on any Receivables or the Credits related to any Contract in whole or in
part, except as permitted herein or in the Indenture.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in connection with
the Purchased Assets. The Servicer will not amend, rescind, cancel or modify any
Contract or term or provision thereof, except as permitted herein or in the
Indenture or in connection with an Upgrade, and the Servicer will not do
anything that would impair the rights of the Noteholders in the Purchased
Assets, except as contemplated herein or in the Indenture; provided that,
without limiting the foregoing, the Servicer may once per Contract over the
lifetime of such Contract allow the Obligor of such Contract to skip one
Scheduled Payment and add one month to the term of the related Contract;
provided, further, that such extension will not extend the date of the last
payment of any Contract one month beyond the Stated Maturity of the related
Series of Notes.
(iii) As more specifically set forth below, in performing its servicing
duties hereunder, the Servicer shall collect all payments required to be made by
the Obligors under the Contracts and enforce all material rights of the Issuer
under the Contracts. The Servicer shall not assign, sell, pledge or exchange or
in any way encumber or otherwise dispose of the Receivables or the Credits,
except as permitted hereunder or in the Indenture.
(b) The Servicer will deliver each of the accountings, statements and
reports described in Article 4 hereof to each party as set forth therein.
(c) The Servicer shall maintain insurance coverage for employee
dishonesty with respect to funds it holds in an amount greater than or equal to
$500,000 per occurrence.
(d) Trendwest and the Servicer will not consent (except as may be
required by the reasonableness standard in Section 2.3 of the Third Amended
Vacation Program Agreement, dated as of June 3, 1994, between Trendwest and
WorldMark, as amended) to any request from WorldMark to allow WorldMark to
encumber, pledge or hypothecate any vacation property under such Section 2.3.
ARTICLE 3 ADMINISTRATION AND SERVICING OF CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for
the benefit of the Noteholders, shall be responsible for, and shall, in
accordance with its customary practices, pursue the managing, servicing,
administering, enforcing and making of collections on the Contracts, the
Credits, the enforcement of the Trustee's security interest in the Receivables
and the Credits granted pursuant to the Indenture, and, if applicable, the
resale of the Credits, each in accordance with applicable law and the standards
and procedures set forth in this Agreement and any related provisions of the
Indenture, the Sale Agreement and the Receivables Purchase Agreement. The
Servicer's responsibilities shall include collecting and posting of all
payments, responding to inquiries of Obligors, investigating delinquencies,
accounting for collections and furnishing monthly and annual statements to the
Trustee and the Noteholders with respect to payments and using its best efforts
to maintain the perfected security interest of the Trustee in each Series Trust
Estate (except with respect to the Credits). Subject to the terms and conditions
of this Agreement, the Servicer (at its expense), acting alone or through a
subservicer, including the Subservicer, shall have full power and authority,
acting at its sole discretion, to do any and all things in connection with such
managing, servicing, administration, enforcement, collection and such resale of
the Credits that it may deem necessary or desirable and in the best interests of
the Noteholders, including the prudent delegation of such responsibilities.
Without limiting the generality of the foregoing, the Servicer, in its own name
or in the name of the Subservicer, shall, and is hereby authorized and empowered
by the Trustee, subject to Section 3.02 hereof, to execute and deliver (on
behalf of itself, the Noteholders, the Trustee or any of them) any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Contracts,
the Custodian Files and the Contract Files. Subject to the terms and conditions
of this Agreement, the Servicer, acting alone or through the Subservicer, also
may, in its sole discretion, waive any late payment charge or penalty, or any
other fees that may be collected in the ordinary course of servicing any
Contract. Notwithstanding the foregoing, neither the Servicer, nor the
Subservicer, shall, except pursuant to an Upgrade or a judicial order from a
court of competent jurisdiction, or as otherwise expressly provided in this
Agreement, release or waive the right to collect the Scheduled Payments or any
unpaid balance on any Contract. The Trustee shall, at the expense of the
Servicer, furnish the Servicer, or at the request of the Servicer, the
Subservicer, with any powers of attorney and other documents necessary or
appropriate to enable the Servicer or the Subservicer to carry out their
servicing and administrative duties hereunder, and the Trustee shall not be
responsible for the Servicer's or the Subservicer's application thereof.
Notwithstanding the appointment by the Servicer of the Subservicer or any
delegation of its responsibilities hereunder, the Servicer shall remain
primarily liable for the full performance of its obligations hereunder;
provided, however, that if the Servicer requests from the Holders the removal of
the Subservicer with respect to any Series after the occurrence of a Subservicer
Event of Default, or any act or omission that with the passage of time would be
a Subservicer Event of Default, and the Holders of 66-2/3% in principal amount
of the Notes of the Controlling Class of such Series Outstanding do not consent
to such request, the Servicer shall no longer be liable for any subsequent acts
of the Subservicer except any acts taken by Sage at the direction of the
Servicer.
(b) The Servicer shall conduct any Contract management, servicing,
administration, collection or enforcement actions in the following manner:
(i) The Servicer, as agent for and on behalf of the Issuer, with respect to
any Defaulted Contract shall follow such practices and procedures as are normal
and consistent with the Servicer's standards and procedures relating to its own
contracts, receivables and vacation credits that are similar to the Contracts,
Receivables and the Credits, including without limitation, the taking of
appropriate actions to foreclose or otherwise liquidate any such Defaulted
Contract, together with the related Credits, to collect any Guaranty Amounts,
and to enforce the Issuer's rights in or under the Sale Agreement and the
Receivables Purchase Agreement. The Servicer shall continue its customary
practice of applying payments on Defaulted Contracts and Delinquent Contracts
first to delinquent interest, then to interest and then to principal. All
Recoveries or Residual Proceeds in respect of any such Receivable and the
related Credits received by the Servicer or the Subservicer shall be deposited
in the Clearing Account pursuant to Section 3.03(a);
(ii) The Servicer may sue to enforce or collect upon Contracts as agent for
the Trustee. If the Servicer elects to commence a legal proceeding to enforce a
Contract, the act of commencement shall be deemed to be an automatic assignment
of the Contract to the Servicer for purposes of collection only. If, however, in
any enforcement suit or legal proceeding it is held that the Servicer may not
enforce a Contract on the ground that it is not a real party in interest or a
holder entitled to enforce the Contract, then the Trustee shall, at the
Servicer's request and expense, take such steps as the Servicer deems necessary
and instructs the Trustee in writing to take to enforce the Contract, including
bringing suit in its name or the name of the Issuer or the names of the
Noteholders, and the Trustee shall be indemnified by the Servicer for any such
action taken;
(iii) The Servicer shall exercise any rights of recourse against third
parties that exist with respect to any Contract in accordance with the
Servicer's usual practice and applicable law. In exercising recourse rights, the
Servicer is authorized on the Trustee's behalf to reassign the Contract to the
person against whom recourse exists to the extent necessary, and at the price
set forth in the document creating the recourse. The Servicer will not reduce or
diminish such recourse rights, except to the extent that it exercises such
right;
(iv) The Servicer may not accept Substitute Contracts that do not comply
with Section 3.10 hereof, Sections 3.03 and 3.04 of the Receivables Purchase
Agreement, Sections 3.03 and 3.04 of the Sale Agreement and Section 4.03 of the
Indenture;
(v) The Servicer may waive, modify or vary any terms of any Contract or
consent to the postponement of strict compliance with any such term if in the
Servicer's reasonable and prudent determination such waiver, modification or
postponement is not materially adverse to the Noteholders of any Series;
provided, however, that except as otherwise expressly permitted with respect to
an Upgrade, (A) the Servicer shall not forgive any payment, and (B) the Servicer
shall not permit any modification, waivers, variation or postponements with
respect to any Contract that would decrease the Scheduled Payment, defer the
payment of any principal or interest or any Scheduled Payment, reduce the
Aggregate Collateral Value relating to the Notes of any Series (except in
connection with actual payments attributable to such Aggregate Collateral
Value), or prevent the complete amortization of the Aggregate Collateral Value
relating to the Notes of any Series from occurring by the Calculation Date
preceding the Stated Maturity with respect to such Notes. The Monthly Servicer's
Report shall indicate any modification of any Scheduled Payment pursuant to
Section 2.02(a)(ii) hereof; and
(vi) Notwithstanding any provision to the contrary contained in this
Agreement, the Servicer or the Subservicer shall exercise any right under a
Contract to accelerate the unpaid Scheduled Payments, due or to become due
thereunder in such a manner as to maximize the net proceeds available to the
Issuer; provided, however, that the Servicer will not accelerate any Scheduled
Payment unless permitted to do so by the terms of the Contract and under
applicable law.
Section 3.02. Standard of Care. In managing, administering,
servicing, enforcing and making collections on the Contracts and the Credits
pursuant to this Agreement, each of the Servicer and the Subservicer will
provide such services in a manner consistent with past practice and applicable
law and will not change such practice in any way that would cause an adverse
material change in such practice. In any event, each of the Servicer and the
Subservicer warrants that in providing such services it will exercise that
degree of skill and care consistent with that which other servicers in the
industry customarily exercise with respect to similar contracts and vacation
credits owned or serviced by them. Each of the Servicer and the Subservicer
shall punctually perform all of its obligations and agreements under this
Agreement and shall comply with all applicable federal and state laws and
regulations, shall maintain all state and federal licenses and franchises
necessary for it to perform its servicing responsibilities hereunder, and shall
not materially impair the rights of the Noteholders in any Contracts or payments
thereunder.
Section 3.03. Clearing Account, ACH Payments and Servicer
Remittances. (a) The Servicer has previously instructed (or, with respect to
Substitute Contracts, will have instructed) each Obligor to remit his or her
payments to the Subservicer. The Subservicer shall deposit all payments for
principal and interest on the Receivables that it receives into an account (the
"Clearing Account") maintained at the Clearing Account Bank in the name of, and
in the sole control of, the Subservicer. The Servicer or the Subservicer shall
cause payments made by automated clearing house debit to be deposited directly
into the Clearing Account from the Obligor's relevant account. On each Business
Day, the Subservicer shall, or shall cause the Clearing Account Bank to,
transfer all amounts in the Clearing Account collected relating to the Contracts
and the Receivables to the Collection Account for the appropriate Series, which
shall be an Eligible Account at the Collection Account Bank in the name of the
Trustee on behalf of the Noteholders of such Series. The Trustee, based solely
on information set forth in the Monthly Servicer's Report for a Series, shall
cause the amounts in the Collection Account for such Series to be deposited in
the Distribution Account for such Series on the Remittance Date in an amount
necessary to make the distributions set forth in Section 12.02(d) of the
Indenture and Section 5.01 of the applicable Series Supplement on the related
Payment Date.
(b) Except as otherwise provided in this Agreement, the Servicer, as
agent of the Issuer, shall remit or cause to be remitted to the Subservicer for
deposit in the Clearing Account by 4:00 p.m., Seattle time, on each Business Day
the amounts described below that have been received by the Servicer through 4:00
p.m., Seattle time, on the preceding Business Day of such Series:
(i) all payments made under the Contracts relating to the
Receivables due after the applicable Series Cut-Off Date, including
prepayments but excluding taxes, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Contract purchased by the Servicer or the
Issuer, to the extent received by the Servicer; and
(iv) all Guaranty Amounts.
The Servicer shall hold in trust for the benefit of the Noteholders any
payment it receives relating to items (i) through (iv) above until such time as
the Servicer transfers such payment to the Subservicer. The Subservicer shall
hold in trust for the benefit of the Holders of the Notes any payment it
receives relating to items (i) through (iv) above until such time as the
Subservicer transfers any such payment to the Clearing Account Bank for deposit
in the Clearing Account. Any such amounts held in the Clearing Account shall be
held in trust for the benefit of the Noteholders.
Section 3.04. Property Management. Trendwest will continue to manage
the Club in accordance with the management agreement between Trendwest and
WorldMark in existence as of the date hereof, as the same may be amended from
time to time on account of (i) a change in such agreement approved by a majority
of the members of WorldMark, (ii) a change in the agreement made in order to
keep Trendwest or WorldMark in compliance with federal, state or local laws,
rules and regulations, (iii) as such agreement may be amended from time to time
with the written consent of the Holders of Notes representing 66-2/3% in
principal amount of the Notes of the Controlling Class of each Series
Outstanding or (iv) a change in such agreement in the manner described in
Exhibit B to this Agreement.
Section 3.05. Financing Statements. (a) The Servicer will make all
UCC filings and recordings as may be required pursuant to the terms of the
Indenture. The Servicer shall, in accordance with its customary servicing
procedures and at its own expense, be responsible for such steps as are
necessary to maintain perfection of such security interests. The Trustee hereby
authorizes the Servicer to re-perfect or to cause the re-perfection of such
security interest on its behalf as Trustee, as necessary.
(b) Within thirty (30) days from the date upon which the financing
statements are filed in connection with the issuance of each Series, the
Servicer shall cause searches to be conducted in such offices and promptly
deliver the results of such searches to the counsel of the initial Noteholders
of such Series.
Section 3.06. [Reserved.]
Section 3.07. [Reserved.]
Section 3.08. No Offset. Prior to the termination of this Agreement,
the obligations of the Servicer or the Subservicer under this Agreement shall
not be subject to any defense, counterclaim or right of offset which the
Servicer or the Subservicer have or may have against the Issuer, the Trustee or
any Noteholder whether in respect of this Agreement, the Indenture, each Series
Supplement, the Notes, the Sale Agreement, any Contract, Receivable, Credit or
otherwise.
Section 3.09. Servicing Compensation. As compensation for the
performance of its obligations under this Agreement for each Series, the
Servicer shall be entitled to receive the Servicer Fee related to such Series.
The Servicer Fee for each Series shall be paid monthly, commencing on the
Initial Payment Date related to such Series and terminating on the first to
occur of (i) the receipt of the last Scheduled Payment related to such Series
and related Residual Proceeds with respect to the last remaining Contract
supporting such Series, (ii) the receipt of Recoveries with respect to the last
remaining Contract supporting such Series, or (iii) the date on which the
Issuer, Trendwest or TFI purchases the last remaining Contract or Receivable, as
the case may be, supporting such Series. The Servicer Fee for each Series shall
be paid by the Issuer to the Servicer at the times and in the priority as set
forth in the Indenture and the related Series Supplement. The Servicer shall pay
all expenses incurred by it in connection with its servicing activities
hereunder, including, without limitation, payment of the fees and disbursements
of the Independent Accountants, payment of expenses incurred in connection with
distributions and reports to the Trustee and the Noteholders and shall not be
entitled to reimbursement for such expenses; provided, however, that the
Servicer will be entitled to prompt reimbursement from the Issuer for reasonable
costs and expenses incurred by the Servicer (including reasonable attorney's
fees and out-of-pocket expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted Contracts of a
Series, from amounts received as Recoveries from any Defaulted Contracts
supporting such Series. The Servicer of a Series shall pay the fees and expenses
of the Subservicer for such Series and shall not be entitled to reimbursement
therefor.
Section 3.10. Substitution or Purchase of Contracts and Receivables.
(a) Except with respect to an Upgrade, the Servicer shall not allow termination
of a Contract prior to the scheduled expiration date unless the Obligor prepays
the entire Contract in full or unless the Issuer has (i) pledged to the Trustee
a Substitute Receivable and the Issuer's interest in the related Credits under
the related Substitute Contract, and delivered to the Trustee the original
executed counterpart of such Substitute Contract or (ii) purchased such
Receivable and the Issuer's interest in the related Credits from the Trustee by
remittance of the Purchase Price to the Subservicer for deposit in the Clearing
Account in accordance with Section 3.03(a) hereof; provided, further, that
purchases and substitutions of Receivables pursuant to this subparagraph (a)
shall comply with the requirements of Section 4.03 of the Indenture and the
criteria set forth in Section 3.04 of the Sale Agreement and Section 3.04 of the
Receivables Purchase Agreement.
(b) The Servicer shall permit the Issuer to (i) purchase the
Receivable related to any Defaulted Contract or Delinquent Contract by
remittance by the Issuer to the Subservicer for deposit in the Clearing Account
in accordance with Section 3.03(a) hereof or (ii) substitute for the Receivable
related to any Defaulted Contract or Delinquent Contract a Substitute Receivable
and the Issuer's interest in the Credits under the related Substitute Contract,
upon the delivery to the Trustee of the original executed counterpart of the
Substitute Contract; provided that, purchases and substitutions of Receivables
pursuant to this subparagraph (b) shall comply with the requirements of Section
4.03 of the Indenture and the criteria set forth in Section 3.04 of the Sale
Agreement and Section 3.04 of the Receivables Purchase Agreement.
(c) Notwithstanding any other provision contained in this Agreement,
the Servicer shall not, with respect to a Defaulted Contract, negotiate or enter
into a new contract with the Obligor relating to the Credits or the Obligor's
obligations under such Defaulted Contract unless the Issuer has repurchased or
made a substitution for the Receivable related to such Defaulted Contract in the
manner set forth in subsection (b) hereof.
(d) In the event that Trendwest is required, as a result of the
breach by it of certain representations or warranties, to repurchase or
substitute a Contract pursuant to Section 3.03 of the Sale Agreement and Section
3.03 the Receivables Purchase Agreement, the Servicer shall permit such
repurchase or substitution in accordance with the terms of Sections 3.03 and
3.04 thereof.
(e) On any Determination Date after, with respect to any Series,
Trendwest and TFI collectively have repurchased Defaulted Contracts with an
aggregate Collateral Value equal to the Purchase and Substitution Limit for such
Series (or within $5,000 of such Purchase and Substitution Limit), if after
giving effect to all distributions to be made on the related Payment Date, the
Reserve Account balance for any Series will be equal to or greater than the
Reserve Account Required Balance for such Series and on such date there are
sufficient amounts to pay interest and the Principal Distribution Amount with
respect to all Notes of such Series, Trendwest may, at its option, purchase, in
its own right and not as Servicer hereunder, the Credits relating to a Defaulted
Contract supporting such Series at a price equal to 25% of (i) the initial
principal balance of the related Contract with respect to Contracts which have
not been "upgraded," or (ii) the sum of the initial principal balance of the
original Contract and the increase in principal balance due to Upgrades with
respect to Contracts that have been "upgraded." On such Determination Date, the
proceeds of such sale shall be remitted by Trendwest to the Subservicer for
immediate deposit into the Clearing Account and shall be deemed to be a
collection of principal with respect to such Contract.
(f) Prior to the substitution of any Contract hereunder, the
Subservicer shall review its records and determine that there are no liens or
other interests in such Substitute Contract, the related Substitute Receivable
and related Credits other than that of Trendwest or TFI, as applicable. If there
are any such other interests in such Substitute Contract, such Contract shall
not become a substitute Contract until all such interests have been terminated.
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01. Monthly Servicer's Reports. No later than 1:00 p.m.,
Chicago time, on each Determination Date, the Servicer shall deliver to the
Issuer, the Placement Agent, the Trustee and each Noteholder the Monthly
Servicer's Report in the form attached as Exhibit B to the applicable Series
Supplement with respect to the activity in the immediately preceding Due Period.
In the course of preparing the Monthly Servicer's Report, the Servicer shall
seek direction from the Issuer as to remittance of the funds to be paid to the
Issuer after all other distributions in accordance with the Indenture and the
applicable Series Supplement. Contracts and Receivables which have been
substituted for or purchased by Trendwest or the Issuer shall be identified by
the related Obligor number. On each Determination Date, the Subservicer shall
deliver to the Trustee, in the form of a computer disk or tape or via electronic
transmission in a format acceptable to the Trustee, containing all the
information in the Subservicer's electronic files regarding each of the
Receivables as well as any additional information reasonably requested by the
Trustee prior to the related Payment Date. The Monthly Servicer's Report for
each Series prepared for each Due Period for June, September, December and March
shall also include a summary of the following information as of the end of such
Due Period: the total number of Credits, whether sold or unsold; and the number
of developed properties of the Club; the name of each such developed property
and the total number of Credits allocated to each developed property.
Section 4.02. Financial Statements; Certification as to Compliance;
Notice of Default. (a) The Servicer (or the successor Servicer if the initial
Servicer is no longer the Servicer) will deliver, or cause to be delivered, to
the Trustee, the Placement Agent and each Holder (and, upon the request of any
Noteholder, to any prospective transferee of any Note):
(i) within 120 days after the end of each fiscal year of each Reported
Company, a copy of such Reported Company's Financial Statements, all in
reasonable detail and accompanied by an opinion of a firm of independent
certified public accountants (which shall be (i) KPMG Peat Marwick, (ii) a legal
successor thereto, or (iii) a nationally recognized accounting firm) stating
that such financial statements present fairly the financial condition of such
Reported Company (or, in the case of a successor Servicer, such successor
Servicer's financial condition) and have been prepared in accordance with
generally accepted accounting principles consistently applied (except for
changes in application in which such accountants concur), and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(ii) within 60 days of the end of each fiscal quarter, unaudited versions
of each Reported Company's consolidated balance sheet, income statement and cash
flow statement; and
(iii) with the Issuer's, the Servicer's and Trendwest's (if Trendwest is
not the Servicer) Financial Statements delivered pursuant to subsections (a)(i)
and (a)(ii) above, each of the Issuer, the Servicer and Trendwest (if Trendwest
is not the Servicer) will deliver an Officer's Certificate stating that such
officer has reviewed the relevant terms of the Indenture, the Sale Agreement,
the Receivables Purchase Agreement and this Agreement and has made, or caused to
be made, under such officer's supervision, a review of the transactions and
conditions of such Reported Company during the period covered by such Reported
Company's Financial Statements then being furnished, that the review has not
disclosed the existence of any Default or Event of Default under the Indenture
or any Servicer Default or Servicer Event of Default or, if a Default or Event
of Default under the Indenture or a Servicer Default or a Servicer Event of
Default exists, describing its nature, and the Issuer, with respect to a Default
or Event of Default, or the Servicer, with respect to a Servicer Default or a
Servicer Event of Default, describing what action such Person has taken and is
taking with respect thereto, and that on the basis of such review the officer
signing such certificate is of the opinion that during such period the Servicer
has serviced the Contracts in compliance with the procedures hereof except as
disclosed in such certificate;
(iv) with each Reported Company's Financial Statements delivered pursuant
to subsections (a)(i) and (a)(ii) above, each Reported Company shall deliver an
Officer's Certificate stating that such financial statements present fairly the
financial condition of such Reported Company;
(v) immediately upon becoming aware of the existence of any condition or
event which constitutes a Servicer Default, a Servicer Event of Default, a
Subservicer Default or a Subservicer Event of Default hereunder, a Default or an
Event of Default under the Indenture, Sale Agreement or Receivables Purchase
Agreement, or a Trigger Event or Cash Accumulation Event under the Indenture, a
written notice describing its nature and period of existence and what action the
Servicer is or proposes to take with respect thereto;
(vi) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it, the Subservicer, the Club
or the Issuer by any governmental authority or agency, or
(B) any pending or proposed court or administrative proceeding which
involves or may involve the possibility of materially and adversely affecting
the properties, business, prospects, profits or condition (financial or
otherwise) of the Servicer, the Subservicer, TFI, the Club or the Issuer,
a written notice specifying the nature of such investigation or proceeding
and what action the Servicer is taking or proposes to take with respect thereto
and evaluating its merits; and
(vi) with reasonable promptness any other data and information which may be
reasonably requested from time to time, including without limitation any
information required to be made available at any time to any prospective
transferee of any Notes in order to satisfy the requirements of Rule 144A under
the Securities Act of 1933, as amended.
(b) On or before each April 30, so long as any of the Notes of any
Series are outstanding, the Servicer shall furnish to the Trustee an Officer's
Certificate either stating that such action has been taken with respect to the
recording, filing, and rerecording and refiling of any financing statements and
continuation statements as necessary to maintain the interest of the Trustee
created by the Indenture and the related Series Supplement, TFI created by the
Sale Agreement and TFI created Receivables Purchase Agreement with respect to
the related Series Trust Estate and reciting the details of such action or
stating that no such action is necessary to maintain such interest. Such
Officer's Certificate shall also describe the recording, filing, rerecording and
refiling of any financing statements and continuation statements that will be
required to maintain the interest of the Trustee in the related Series Trust
Estate until the date such next Officer's Certificate is due.
Section 4.03. Independent Accountants' Reports. (a) Within thirty
(30) days of the Closing Date, the Servicer shall, at its expense, cause the
Independent Accountants to prepare a report, a form of which is attached as
Exhibit A hereto (which report shall also include as well the additional
procedure of comparing the actual aging of the random sample portfolio to the
aging number provided by the Subservicer's system), to the effect that such
Independent Accountants have reviewed a statistically significant random sample
(at the 95% confidence level) of the Custodian Files and that such reviewed
Custodian Files are in the possession of the Subservicer and properly accounted
for in the Subservicer's records.
(b) For each fiscal year (commencing with the fiscal year ending
December 31, 1998), the Servicer at its expense shall cause the Independent
Accountants (who may also render and deliver other services to the Servicer and
its Affiliates) to prepare a report that shall include the information set forth
in the report set forth in paragraph (a) of this Section 4.03 and which shall
also include a report addressed to the Servicer, the Trustee and the Noteholders
as of the close of such year, to the effect that the Independent Accountants
have compared the information contained in the Monthly Servicer's Reports
delivered for a random three-month period during the relevant period with
information contained in the accounts and records for such period, and, where
applicable, on the basis of such procedures and comparison, report matters which
come to the Independent Accountants' attention to indicate that the information
contained in the Monthly Servicer's Reports does not reconcile with the
information contained in the Servicer's accounts and records. If any letter
delivered pursuant to this Section 4.03 (commencing with the letter relating to
the fiscal year ending December 31, 1998) discloses such exceptions, the
Servicer at its expense shall cause the Independent Accountants to deliver an
agreed-upon procedures letter addressed to the Servicer, the Trustee and the
Noteholders for each subsequent three-month period. Such obligation shall
continue until the Independent Accountants deliver a letter relating to a
three-month period that does not disclose any such exceptions. Thereafter, the
Servicer shall cause a letter to be delivered relating to each fiscal year in
accordance with the first sentence of this Section 4.03. The Servicer shall
deliver to the Trustee a copy of any such reports within 90 days of the close of
the relevant period.
Section 4.04. Access to Certain Documentation and Information. (a)
Each of the Servicer and the Subservicer shall provide to the Trustee or any
Noteholder and their duly authorized representatives, attorneys or accountants
access to any and all documentation and to any existing data processing systems
(including, but not limited to, any data that can reasonably be generated
therefrom) regarding the applicable Series Trust Estate (including the Contract
Schedule) that the Servicer and the Subservicer may possess, such access being
afforded without charge but only upon reasonable request and during normal
business hours so as not to interfere unreasonably with the Servicer's or
Subservicer's normal operations or customer or employee relations, at offices of
the Servicer and the Subservicer designated by the Servicer and the Subservicer.
If a Servicer Event of Default, a Subservicer Event of Default, a Cash
Accumulation Event or a Trigger Event has occurred, the reasonable costs of
providing the foregoing shall be borne by the Servicer; otherwise, the Person
seeking the foregoing shall pay its, his or her own expenses relating to the
foregoing.
(b) At all times during the term hereof, the Servicer shall keep
available at its principal executive office for inspection by Noteholders and
the Trustee a list of all Contracts the interests in which are then held as a
part of each Series Trust Estate, together with a reconciliation of such list to
that set forth in the Contract Schedule and each of the Monthly Servicer's
Reports, indicating the cumulative addition and removal of the Issuer's interest
in the Contracts from each Series Trust Estate.
(c) Each of the Servicer and the Subservicer will maintain accounts
and records as to each respective Contract serviced by the Servicer and the
Subservicer that are accurate and sufficiently detailed as to permit (i) the
reader thereof to know as of the most recent Calculation Date the status of such
Contract, including any payments, Residual Proceeds and Recoveries received or
owing (and the nature of each) thereon and (ii) the reconciliation between
payments, Residual Proceeds or Recoveries on (or with respect to) each Contract
and the amounts from time to time deposited in the applicable Collection Account
in respect of such Contract.
(d) Each of the Servicer and the Subservicer will maintain all of its
computerized accounts and records so that, from and after the time of the
acquisition of an interest in the Purchased Assets by the Issuer, the Servicer's
and the Subservicer's accounts and records (including any back-up computer
archives) that refer to any Contract, Receivable or Credits indicate clearly
that the Receivables are owned by the Issuer and are pledged, together with the
Issuer's security interest in the related Credits, to the Trustee for the
benefit of the Noteholders of a particular Series. Indication of the Trustee's
interest in a Receivable will be deleted from or modified on the Servicer's
accounts and records when, and only when, the Receivable or related Contract has
been paid in full, replaced with a Substitute Contract or purchased by Trendwest
or the Issuer or assigned to the Servicer pursuant to this Agreement, as the
case may be.
(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer or the Subservicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure to provide information
otherwise required by this Section 4.04 as a result of such observance by the
Servicer, shall not constitute a breach of this Section 4.04.
(f) All information (that is not public information) obtained by the
Trustee or any Noteholder regarding any Reported Company (pursuant to Section
4.02 or otherwise), the Obligors and the Contracts, whether upon exercise of its
rights under this Section 4.04 or otherwise, shall be maintained by the Trustee
and the Noteholder, as applicable, in confidence in accordance with procedures
adopted by the Trustee or such Noteholder, as applicable, in good faith to
protect such confidential information; provided that the Trustee and any
Noteholder may deliver or disclose such confidential information to (i) their
directors, officers, trustees, managers, employees, agents, attorneys and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by the Notes), (ii) their financial
advisors and other professional advisors who agree to hold confidential such
information substantially in accordance with the terms of this Section 4.04(f),
(iii) any other holder of any Note, (iv) any Institutional Investor to which any
Noteholder sells or offers to sell such Note or any part thereof or any
participation therein (if such Person has agreed in writing prior to its receipt
of such confidential information to be bound by the provisions of this Section
4.04(f)), (v) any federal or state regulatory authority having jurisdiction over
the Trustee or any Noteholder, (vi) the National Association of Insurance
Commissioners or any similar organization, or any nationally recognized rating
agency that requires access to information about the Noteholders' investment
portfolio or (vii) any other Person to which such delivery or disclosure may be
necessary or appropriate (w) to effect compliance with any law, rule, regulation
or order applicable to the Trustee or any Noteholder, (x) in response to any
subpoena or other legal process, (y) in connection with any litigation to which
the Trustee or any Noteholder is a party or (z) if an Event of Default has
occurred and is continuing, to the extent the Trustee or any Noteholder may
reasonably determine such delivery and disclosure to be necessary or appropriate
in the enforcement or for the protection of the rights and remedies under the
Notes and the Transaction Documents.
Section 4.05. Trustee to Cooperate. Upon payment (including through
application of any prepayment) in full of any Contract, the Servicer will notify
the Trustee by written certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payments in full which are required to be deposited in the Clearing Account
pursuant to Section 3.03 hereof have been so deposited) of a Servicing Officer
and shall request delivery of the Contract to the Servicer in accordance with
Section 1.3 of the Custodian Agreement. Upon receipt of such delivery request,
the Custodian shall, within 7 days of such request by the Servicer, release such
Contract to the Servicer in accordance with the Custodian Agreement. Upon
release of such Contract, the Servicer is authorized to execute an instrument in
satisfaction of such Contract and to do such other acts and execute such other
documents as it deems necessary to discharge the Obligor thereunder and, if
applicable, release any security interest in the Credits related thereto. The
Servicer shall determine when a Contract has been paid in full. Upon the written
request of a Servicing Officer and subject to the Trustee's rights to indemnity
contained herein and in the Indenture, the Trustee shall perform such other acts
as reasonably requested in writing by the Servicer and otherwise cooperate with
the Servicer in enforcement of the Noteholders' rights and remedies with respect
to Contracts.
Section 4.06. Oversight of Servicing. (a) Prior to each Payment Date, the
Trustee shall review the Monthly Servicer's Report for each Series related
thereto and shall determine the following:
(i) that such Monthly Servicer's Report is complete on its face;
(ii) that the amounts credited to and withdrawn from the Collection Account
and the Reserve Account, and to be transferred to and withdrawn from the
Distribution Account and the balance of each such account, as set forth in the
records of the Trustee, are the same as the amount set forth in such Monthly
Servicer's Report;
(iii) that the Servicer has properly calculated certain of the amounts that
are to be distributed pursuant to Section 5.01 of the related Series Supplement
on such Payment Date, as specified in such Series Supplement; and
(iv) based solely on information set forth in such Monthly Servicer's
Report, determine that the Projected Income for the related Due Period equals
the sum of payments received as principal and interest from Obligors due in such
Due Period plus the amount of principal and interest not paid on Delinquent
Contracts and Defaulted Contracts (including amounts due by virtue of canceled
or bounced checks or other reversed payments) minus any payments due in other
Due Periods that were paid in such Due Period (both late payments and
prepayments).
(b) In the event of any discrepancy between the information set forth
in subparagraph (a) as calculated by the Servicer from that determined or
calculated by the Trustee, the Trustee shall promptly notify the Servicer of
such discrepancy. If within 30 days of such notice being provided to the
Servicer, the Trustee and the Servicer are unable to resolve such discrepancy,
the Trustee shall promptly notify the Holders of the Notes of such Series of
such discrepancy.
(c) Based solely on the information included in the Series Contract
Schedule delivered on the related Series Closing Date and the electronic reports
provided on each Payment Date thereafter, the Trustee shall determine that any
Substitute Contracts delivered under Section 3.10 satisfy the Substitution
Criterion described in clause (i) of the second sentence of Section 3.04(b) of
the Sale Agreement and clause (i) of the second sentence of Section 3.04(b) of
the Receivables Purchase Agreement.
(d) Other than as specifically set forth elsewhere in this Agreement,
the Trustee shall have no obligation to supervise, verify, monitor or administer
the performance of the Servicer or the Subservicer and shall have no liability
for any action taken or omitted by the Servicer or the Subservicer.
(e) The Trustee shall consult fully with the Servicer and the
Subservicer as may be necessary from time to time to perform or carry out the
Trustee's obligations hereunder, including the obligation to choose at any time
a successor to the duties and obligations of the Servicer as servicer or
Subservicer under Section 6.02 hereof.
(f) The Subservicer shall provide the Trustee with a copy of the
Subservicer's proprietary software that the Subservicer currently uses to
service the Contracts, which software shall be held in escrow by the Trustee,
only to be used solely by the Trustee in the event that the Subservicer is
removed or otherwise ceases to act in the capacity as Subservicer, and only
until such time as the Trustee can obtain replacement software or appoint a
successor Subservicer in accordance with Section 7.03 (up to a maximum of 90
days from the date that the Subservicer ceases performing services under this
Agreement); if the Trustee needs to use such software beyond such 90-day period,
Trendwest will pay the Subservicer, on behalf of the Trustee (prior to the
expiration of such 90 day period) a license fee of $10,000.00 (payable in
advance), which payment shall extend the Trustee's license to use such software
until the earlier to occur of: (i) two (2) years from the date that the
Subservicer ceases performing services under this Agreement; or (ii) final
payment of all amounts due on the Notes of each Series Outstanding. The Trustee
may extend such license for successive two-year periods upon payment of $10,000
per period (which fees shall be paid by Trendwest), due prior to the beginning
of each such period. The limited license to use the Subservicer's software set
forth in this paragraph may not be sublicensed, assigned or transferred by the
Trustee without Subservicer's prior written consent, and such license does not
include the right to reverse assemble, reverse engineer or reverse compile the
software. The Trustee agrees to take all appropriate measures to protect the
confidentiality of such software and will return all copies of such software
upon the earlier to occur of: (i) the expiration of Trustee's license to use the
software (as detailed above); (ii) Trustee's conversion to replacement software
or alternative servicing arrangements; or (iii) final payment of all amounts due
on the Notes of each Series Outstanding.
ARTICLE 5 THE SERVICER, THE SUBSERVICER AND THE ISSUER
Section 5.01. Servicer and Subservicer Indemnification. (a) The
Servicer shall indemnify and hold harmless the Trustee, TFI, the Issuer, and
each Series Trust Estate, for the benefit of the Noteholders, from and against
any loss, liability, claim, expense, damage or injury suffered or sustained to
the extent that such loss, liability, claim, expense, damage or injury arose out
of or was imposed by reason of the failure by the Servicer to perform its duties
under this Agreement or are attributable to errors or omissions of the Servicer
related to such duties; provided, however, that the Servicer shall not indemnify
any party to the extent that acts of fraud, gross negligence or breach of
fiduciary duty by such party contributed to such loss, liability, claim,
expense, damage or injury.
(b) The Subservicer shall indemnify and hold harmless the Trustee,
TFI, the Issuer, the Servicer and each Series Trust Estate, for the benefit of
the Noteholders, from and against any loss, liability, claim, expense, damage or
injury suffered or sustained to the extent that such loss, liability, claim,
expense, damage or injury arose out of or was imposed by reason of the failure
by the Subservicer to perform its duties under this Agreement or are
attributable to errors or omissions of the Subservicer related to such duties;
provided, however, that the Subservicer shall not indemnify any party to the
extent that acts of fraud, gross negligence or breach of fiduciary duty by such
party contributed to such loss, liability, claim, expense, damage or injury.
(c) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer or Subservicer has made any indemnity
payments to the Trustee or the Noteholders pursuant to this Section and such
party thereafter collects any of such amounts from others, such party will
promptly repay such amounts collected to the Servicer or Subservicer, as
applicable, without interest. The provisions of this Section 5.01 shall survive
any expiration or termination of this Agreement.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer
and the Subservicer shall keep in full effect their existence and good standing
as corporations in the State of their incorporation and will obtain and preserve
their qualification to do business as foreign corporations in each jurisdiction
in which such qualification is or shall be necessary to enable the Servicer or
the Subservicer to perform their duties under this Agreement, except where the
failure to so qualify would not have a material adverse effect on any Series
Trust Estate or the ability of the Servicer or the Subservicer to perform their
duties hereunder; provided, however, that the Servicer and the Subservicer may
reincorporate in another State, if to do so would be in the best interests of
the Servicer or the Subservicer and would not have a material adverse effect
upon the Noteholders.
(b) Neither the Servicer nor the Subservicer shall (i) convey,
transfer or lease substantially all of its assets as an entirety to any Person,
or (ii) merge or consolidate with another Person, unless such Person or the
merged or consolidated entity acquires substantially all the assets of the
Servicer or the Subservicer, as the case may be, as an entirety and executes and
delivers to the Issuer and the Trustee an agreement, in form and substance
reasonably satisfactory to the Issuer and the Trustee, which contains an
assumption by such Person or entity of the due and punctual performance and
observance of each covenant and condition to be performed or observed by the
Servicer or the Subservicer, as the case may be, under this Agreement; provided
that nothing herein shall prevent the Servicer from selling contracts and
receivables which are not Purchased Assets pursuant to a receivables financing.
Section 5.03. Limitation on Liability of the Servicer, the
Subservicer and Others. Except as provided in Section 5.01, the Servicer, the
Subservicer and any of the officers, directors, employees or agents of the
Servicer or the Subservicer shall not be under any liability for any action
taken or for refraining from the taking of any action in their capacity as
Servicer or Subservicer pursuant to this Agreement; provided, however, that this
provision shall not protect the Servicer or Subservicer or any such Person
against any liability which would otherwise be imposed by reason of willful
misconduct, bad faith or negligence (which includes negligence with respect to
the duties of the Servicer or Subservicer explicitly set forth in this
Agreement) in the performance of its duties hereunder. The Servicer, the
Subservicer and any officer, director, employee or agent of the Servicer or the
Subservicer may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person with respect to any matters
arising hereunder. No implied covenants or obligations shall be read into the
Servicing Agreement against the Servicer or the Subservicer. In the event the
Servicer or the Subservicer perform any activities beyond the requirements of
this Agreement, they shall have the option but will not be required to perform
such activities in the future.
Section 5.04. The Servicer and Subservicer Not to Resign. (a)
Neither the Servicer nor the Subservicer (except as set forth in the last
sentence of this subsection (a) shall resign from the duties and obligations
hereby imposed on it by this Agreement except upon a determination by the Board
of Directors of the Servicer or Subservicer, as the case may be, that by reason
of change in applicable legal requirements, with which the Servicer or
Subservicer, as the case may be, cannot reasonably comply, the continued
performance by the Servicer or the Subservicer, as the case may be, of its
duties under this Agreement would cause it to be in violation of such legal
requirements, said determination to be evidenced by a resolution from the
appropriate Board of Directors to such effect, accompanied by an Opinion of
Counsel to such effect and reasonably satisfactory to the Trustee. The
Subservicer may resign as Subservicer hereunder upon the termination of the
Service Agreement between the Servicer and the Subservicer, dated as of January
1, 1996 or any successor agreement thereto.
(b) No such resignation shall become effective until a successor
Servicer or Subservicer, as the case may be, shall have assumed the
responsibilities and obligations of the Servicer or Subservicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties
and obligations of the Servicer and Subservicer under this Agreement shall
continue until this Agreement shall have been terminated as provided in Section
8.01 hereof, and shall survive the exercise by the Issuer or the Trustee of any
right or remedy under this Agreement, or the enforcement by the Issuer, the
Trustee or any Noteholder of any provision of the Notes or this Agreement.
Section 5.05. Issuer Indemnification. The Issuer shall indemnify and
hold harmless the Servicer and the Subservicer (but solely from the amounts to
be distributed to the Issuer as set forth in Sections 5.01 and 5.02 of the
applicable Series Supplement) from and against any loss, liability, expense,
damage or injury suffered or sustained by the Servicer or the Subservicer,
including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any actual or threatened action, proceeding or claim, which arises
out of the Servicer's or the Subservicer's activities hereunder; provided,
however, that the Issuer shall not indemnify the Servicer or the Subservicer if
the Servicer's or the Subservicer's activities constituted fraud, willful
misconduct, negligence (which includes negligence with respect to the duties of
the Servicer which are explicitly set forth in this Agreement) or breach of
fiduciary duty by the Servicer or the Subservicer for any amounts for which the
Servicer or Subservicer is obligated to indemnify the Issuer or other Persons
pursuant to Section 5.01 hereof.
ARTICLE 6 SERVICING TERMINATION
Section 6.01. Servicer Events of Default. (a) With respect to each Series,
any of the following acts or occurrences shall constitute a Servicer Event of
Default with respect to such Series:
(i) any failure by the Servicer to deliver to the Subservicer for payment
to Noteholders any proceeds or payments received from an Obligor or in respect
of the related Series Trust Estate and required to be so delivered under the
terms of the Indenture and this Agreement that continues unremedied until 1:00
p.m., Chicago time, on the second successive Business Day following such
failure; provided, however, that the Subservicer, upon receiving actual
knowledge of such failure, shall give the Servicer and the Trustee prompt
written, telecopied or telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Subservicer to deliver such notice to the Servicer
shall not prevent the occurrence of a Servicer Event of Default; or
(ii) any failure by the Servicer to deliver a Monthly Servicer's Report
pursuant to Section 4.01 hereof that continues unremedied until 1:00 p.m.,
Chicago time, the following Business Day; provided, however, that if the Trustee
has actual knowledge that the Servicer has not delivered such Monthly Servicer's
Report by 1:00 p.m., Chicago time, on a Determination Date, the Trustee shall
give the Servicer written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to deliver such notice
to the Servicer shall not prevent the occurrence of a Servicer Event of Default;
or
(iii) any failure by the Servicer to remit any Purchase Price received by
it to the Subservicer that continues unremedied until 4:00 p.m., Chicago time,
the following Business Day; provided, however, that if the Servicer has not
remitted any Purchase Price received by it to the Subservicer by 2:00 p.m.,
Chicago time, on the Determination Date and the Trustee has received written
notification from the Subservicer by way of the applicable Monthly Servicer's
Report or otherwise that such Purchase Price has not been paid, the Trustee
shall give the Servicer prompt written, telecopied or telephonic notice of such
failure. Notwithstanding the foregoing, any failure by the Trustee to deliver
such notice to the Servicer shall not prevent the occurrence of a Servicer Event
of Default; or
(iv) any failure by the Servicer to make remittances (other than a
remittance of Purchase Price referred to in clause (iii) above) or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until 1:00
p.m., Chicago time, of the second successive Business Day; or
(v) any failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement or the
Indenture or the related Series Supplement, as the case may be, or any
representation or warranty of the Servicer set forth in Section 2.01 of this
Agreement shall prove to be incorrect in any material respect, which failure or
breach continues unremedied for a period of 30 days after the date on which the
Servicer becomes aware of such failure or breach, or receives written notice of
such failure or breach; or
(vi) any assignment by the Servicer to a delegate of its duties or rights
under this Agreement, except as specifically permitted hereunder, or any attempt
to make such an assignment; or
(vii) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Servicer or a petition against the Servicer in an
involuntary case under any federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official for the Servicer or for any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Servicer and the continuance of any such decree or order
unstayed and in effect, or failure for such petition to be dismissed, for a
period of 60 consecutive days; or
(viii) the commencement by the Servicer of a voluntary case under any
federal bankruptcy laws, as now or hereafter in effect, or any other present or
future federal or state bankruptcy, insolvency, reorganization or similar law,
or the consent by the Servicer to the appointment of or taking possession by a
conservator, receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official in any insolvency, readjustment of debt, marshaling of
assets and liabilities, bankruptcy or similar proceedings of or relating to the
Servicer relating to a substantial part of its property, or the making by the
Servicer of an assignment for the benefit of creditors, or the failure by the
Servicer generally to pay its debts as such debts become due or if the Servicer
shall admit in writing its inability to pay their debts as they become due, or
the taking of corporate action by the Servicer in furtherance of any of the
foregoing; or
(ix) the stockholders' equity of the Servicer and its consolidated
subsidiaries, determined in accordance with generally accepted accounting
principles, as would be shown on a consolidated balance sheet for such Persons,
is below $50,000,000; or
(x) the occurrence of a Trigger Event if the initial Servicer is the
Servicer; or
(xi) the occurrence of a Subservicer Event of Default.
(b) If a Servicer Event of Default shall have occurred and be
continuing with respect to any Series, the Trustee shall, upon written direction
of the Holders of Notes representing not less than 66-2/3% in principal amount
of the Controlling Class of Notes Outstanding of such Series, by notice (the
"Servicer Termination Notice") given in writing to the Servicer of such Series
terminate all, but not less than all, of the rights and obligations (except as
expressly provided herein) of the Servicer under this Agreement with respect to
such Series. Notwithstanding the foregoing, a delay in or failure of performance
under Sections 6.01(a)(ii) or 6.01(a)(v) hereof for a period of 30 or more days
shall not constitute a Servicer Event of Default if such delay or failure could
not have been prevented by the exercise of reasonable diligence by the Servicer
and such delay or failure was caused by acts of declared or undeclared war,
public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire,
hurricanes, earthquakes, floods or similar causes; provided, however, that in
any event, such delay or failure shall constitute a Servicer Event of Default if
it continues unremedied for a period of 35 days. The preceding sentence shall
not relieve the Servicer from using its best efforts to perform its obligations
in a timely manner in accordance with the terms of this Agreement, and the
Servicer shall provide the Trustee, the Issuer and the Noteholders with prompt
notice of such failure or delay by it or the Subservicer, together with a
description of its efforts to so perform its obligations.
(c) [Reserved]
(d) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer with respect to such Series
under this Agreement, whether with respect to the Notes or the Contracts of such
Series or otherwise, shall pass to and be vested in the successor Servicer
appointed pursuant to Section 6.02 hereof, and, without limitation, such
successor Servicer is hereby authorized and empowered to execute and deliver, on
behalf of such Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer of the Contracts and related documents related
to such Series, or otherwise. The Servicer agrees to cooperate with the Trustee
and the successor Servicer in effecting the termination of the responsibilities
and rights of the Servicer hereunder, including, without limitation, the
transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held by the Servicer for deposit related to such
Series, or have been deposited by the Servicer or thereafter received with
respect to Contracts related to such Series. To assist the successor Servicer in
enforcing all rights under such Contracts, the outgoing Servicer, at its own
expense, shall transfer its records (electronic and otherwise) relating to such
Contracts to the successor Servicer in such form as the successor Servicer may
reasonably request and shall transfer the related Contracts (to the extent not
held by the Trustee) and all other records, correspondence and documents
relating to such Contracts that it may possess to the successor Servicer in the
manner and at such times as the successor Servicer shall reasonably request.
Section 6.02. Appointment of Successor Servicer. (a)(i) On and after
the time at which the Servicer with respect to a Series resigns as Servicer
pursuant to Section 5.04 hereof or is terminated as Servicer pursuant to Section
6.01 hereof, the Trustee shall, at the direction of Holders of Notes
representing not less than 66-2/3% in principal amount of the Controlling Class
of Notes Outstanding of such Series appoint a successor Servicer with respect to
such Series.
(ii) The successor Servicer with respect to a Series shall be the
successor in all respects to the Servicer of such Series in its capacity as
Servicer for such Series under this Agreement, and the transactions set forth or
provided for herein and shall be subject to all the responsibilities, duties and
liabilities relating thereto placed on the Servicer with respect to such Series
by the terms and provisions hereof; provided, however, that any such successor
shall not be liable for any acts or omissions of such outgoing Servicer or for
any breach by such outgoing Servicer of any of its representations and
warranties contained herein or in any related document or agreement. Subject to
the consent of the Holders representing not less than 66-2/3% in principal
amount of the Controlling Class of Notes Outstanding of such Series, such
successor Servicer may subcontract with another firm to act as subservicer so
long as such successor Servicer remains fully responsible and accountable for
performance of all obligations of the Servicer with respect to such Series on
and after the time such Servicer receives the Servicer Termination Notice with
respect to such Series. Such successor Servicer shall be entitled to the
Servicer Fee for such Series in connection with acting as Servicer with respect
to such Series hereunder.
(b) Each of the Servicer, the Subservicer, the Issuer, the Trustee
and any successor Servicer or successor Subservicer with respect to each Series,
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. Upon any succession, such successor Servicer as
well as any successor Subservicer shall notify the Obligors that it has been
appointed Servicer with respect to such Series under this Agreement with respect
to the Contracts.
Section 6.03. Notification to Noteholders. The Servicer with respect
to a Series shall promptly notify the Subservicer, the Issuer and the Trustee of
any Servicer Event of Default with respect to such Series upon actual knowledge
thereof by an officer of such Servicer. Upon any termination of, or appointment
of a successor to, such Servicer pursuant to this Article 6, the Trustee with
respect to a Series shall give prompt written notice thereof to the Noteholders
of such Series at their respective addresses appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Trustee with respect to
such Series shall, at the direction of the Holders of Notes representing not
less than 66-2/3% in principal amount of the Controlling Class of Notes
Outstanding of such Series, on behalf of all Noteholders of such Series, waive
any default by the Servicer with respect to a Series in the performance of its
obligations hereunder and its consequences, other than a default with respect to
required deposits and payments in accordance with Article 3 or a default of the
type set forth in clause (vii) or (viii) of Section 6.01(a) hereof, which waiver
shall require the consent of each Noteholder of such Series. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
Event of Default arising therefrom shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other default or impair any right consequent thereon except to the extent
expressly waived.
Section 6.05. Effects of Termination of Servicer. (a) Upon the
appointment of a successor Servicer for any Series, the predecessor Servicer for
such Series shall remit any Scheduled Payments related to such Series and any
other payments or proceeds that such predecessor may receive pursuant to any
Contract or otherwise related to such Series to such successor after such date
of appointment.
(b) After the delivery of a Servicer Termination Notice with respect
to such Series, the outgoing Servicer for such Series shall have no further
obligations with respect to the management, administration, servicing,
enforcement, custody or collection of the Contracts for such Series, and the
successor Servicer for such Series shall have all of such obligations, except
that such outgoing Servicer will transmit or cause to be transmitted directly to
such successor Servicer promptly on receipt and in the same form in which
received, any amounts held by such outgoing Servicer (properly endorsed where
required for such successor to collect them) received as payments upon or
otherwise in connection with the Contracts for such Series. Such outgoing
Servicer's indemnification obligations pursuant to Section 5.01 hereof will
survive the termination of such Servicer but will not extend to any acts or
omissions of a successor Servicer.
Section 6.06. No Effect on Other Parties. (a) Upon any termination
of the rights and powers of the Servicer for any Series pursuant to Section
6.01, or upon any appointment of a successor to such Servicer, all the rights,
powers, duties and obligations of Trendwest under this Agreement, the Indenture,
each Series Supplement, the Receivables Purchase Agreement and the Sale
Agreement, other than Trendwest's rights, powers, duties and obligations as
Servicer for such Series therein, shall remain unaffected by such termination or
appointment and shall remain in full force and effect thereafter.
ARTICLE 7 THE SUBSERVICER
Section 7.01. Representations and Warranties. The Subservicer makes the
following representations and warranties to the Trustee and for the benefit of
the Noteholders which shall survive the Closing Date:
(a) Organization and Good Standing. The Subservicer has been duly
incorporated and is validly existing in good standing as a corporation under the
laws of the State of Washington, with requisite corporate power and authority to
own its properties, perform its obligations under this Agreement and to transact
the business in which it is now engaged or in which it proposes to engage; the
Subservicer is duly qualified to do business and is in good standing in each
State in which the nature of its business requires it to be so qualified, except
where failure to so qualify would not have a material adverse effect on the
ability of the Subservicer to perform its obligations under this Agreement.
(b) Authorization and Binding Obligation. This Agreement has been duly
authorized, executed and delivered by the Subservicer and constitutes the valid
and legally binding obligation of the Subservicer enforceable against the
Subservicer in accordance with its terms, subject as to enforcement to any
bankruptcy, insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity regardless of whether enforcement is sought in a
court of equity or law.
(c) No Violation. The entering into of this Agreement and the performance
by the Subservicer of its obligations under this Agreement and the consummation
of the transactions contemplated herein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the contemplated pursuant to the terms of any
material indenture, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound or to which any of its property or
assets is subject, nor will such action result in any violation of the
provisions of its Articles of Incorporation or By-laws, or any statute or any
order, rule or regulation of any court or any regulatory authority or other
governmental agency or body having jurisdiction over it or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with any court, or any such regulatory authority or other
governmental agency or body is required for the Subservicer to enter into this
Agreement.
(d) No Proceedings. There are no proceedings or investigations pending, or
to the knowledge of the Subservicer, threatened against or affecting the
Subservicer or any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal, including but not limited to any such
proceeding or investigation with respect to any environmental or other liability
resulting from its business which, individually or in the aggregate, involve the
possibility of materially and adversely affecting the properties, business,
prospects, profits or condition (financial or otherwise) of the Subservicer, or
the ability of the Subservicer to perform its obligations under this Agreement.
The Subservicer is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(e) Approvals. The Subservicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii) has
not failed to obtain any licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, and (iii) is not in violation in any material respect of any term
of any agreement, charter instrument, bylaw or instrument to which it is a party
or by which it may be bound, which violation or failure to obtain materially
adversely affect the business or condition (financial or otherwise) of the
Subservicer and its subsidiaries.
Section 7.02. Subservicer Events of Default. (a) With respect to each
Series, any of the following acts or occurrences shall constitute a Subservicer
Event of Default with respect to such Series:
(i) any failure by the Subservicer to deliver to the Clearing Account Bank
for deposit in the Clearing Account any proceeds or payments received from an
Obligor or the Servicer or in respect of the related Series Trust Estate and
required to be so delivered under the terms of the Indenture and this Agreement
that continues unremedied until 1:00 p.m., Chicago time, on the second
successive Business Day following such failure; provided, however, that the
Trustee, upon receiving actual knowledge of such failure, shall give the
Subservicer prompt written, telecopied or telephonic notice of such failure.
Notwithstanding the foregoing, any failure by the Trustee to deliver such notice
to the Subservicer shall not prevent the occurrence of a Subservicer Event of
Default; or
(ii) any failure on the part of the Subservicer duly to observe or perform
any other covenants or agreements of the Subservicer set forth in this
Agreement, or any representation or warranty of the Subservicer set forth in
Section 7.01 of this Agreement shall prove to be incorrect in any material
respect, which failure or breach continues unremedied for a period of 30 days
after the date on which the Subservicer becomes aware of such failure or breach,
or receives written notice of such failure or breach; or
(iii) any assignment by the Subservicer to a delegate of its duties or
rights under this Agreement, except as specifically permitted hereunder, or any
attempt to make such an assignment; or
(iv) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Subservicer or a petition against the Subservicer
in an involuntary case under any federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official for the Subservicer or for any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Subservicer and the continuance of any such decree or order
unstayed and in effect, or failure for such petition to be dismissed, for a
period of 60 consecutive days; or
(v) the commencement by either the Subservicer of a voluntary case under
any federal bankruptcy laws, as now or hereafter in effect, or any other present
or future federal or state bankruptcy, insolvency, reorganization or similar
law, or the consent by either the Subservicer to the appointment of or taking
possession by a conservator, receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official in any insolvency, readjustment of debt,
marshaling of assets and liabilities, bankruptcy or similar proceedings of or
relating to the Subservicer relating to a substantial part of its property, or
the making by the Subservicer of an assignment for the benefit of creditors, or
the failure by the Subservicer generally to pay its debts as such debts become
due or if the Subservicer shall admit in writing its inability to pay their
debts as they become due, or the taking of corporate action by the Subservicer
in furtherance of any of the foregoing.
(b) If a Subservicer Event of Default with respect to any Series shall have
occurred and be continuing, then the Trustee shall, upon written direction of
the Holders of Notes representing 66-2/3% in principal amount of the Controlling
Class of the Notes Outstanding of such Series, by notice (the "Subservicer
Termination Notice") given in writing to the Subservicer for such Series
terminate all, but not less than all, of the rights and obligations of such
Subservicer under this Agreement. Notwithstanding the foregoing, a delay in or
failure of performance under Sections 7.02(a)(ii) hereof for a period of 30 or
more days shall not constitute a Subservicer Event of Default if such delay or
failure could not have been prevented by the exercise of reasonable diligence by
the Subservicer and such delay or failure was caused by acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or similar causes; provided,
however, that in any event, such delay or failure shall constitute a Subservicer
Event of Default if it continues unremedied for a period of 35 days. The
preceding sentence shall not relieve the Subservicer from using its best efforts
to perform its obligations in a timely manner in accordance with the terms of
this Agreement, and the Subservicer shall provide the Trustee, the Issuer and
the Noteholders with prompt notice of such failure or delay by it, together with
a description of its efforts to so perform its obligations.
Section 7.03. Appointment of Successor Subservicer. (a)(i) On and
after the time at which Subservicer for a Series resigns pursuant to Section
5.04 hereof or is terminated as Subservicer pursuant to Section 7.02(b) hereof,
the Trustee shall, at the direction of Holders of Notes representing at least
66-2/3% in principal amount of the Controlling Class of Notes Outstanding of
such Series appoint a successor Subservicer.
(ii) The successor Subservicer for a Series shall be the successor in
all respects to the Subservicer for such Series in its capacity as Subservicer
under this Agreement, and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties and liabilities relating
thereto placed on the Subservicer with respect to such Series by the terms and
provisions hereof; provided, however, that any such successors shall not be
liable for any acts or omissions of the outgoing Subservicer, as the case may
be, or for any breach by either the outgoing Subservicer of any of its
representations and warranties contained herein or in any related document or
agreement.
(b) The Servicer, the Subservicer, the Issuer, the Trustee and any
successor Servicer or successor Subservicer shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Upon any succession, such successor Servicer as well as any successor
Subservicer shall notify the Obligors that it has been appointed Servicer or
Subservicer, as the case may be, under this Agreement with respect to the
Contracts.
Section 7.04. Notification to Noteholders. The Subservicer for a
Series shall promptly notify the Servicer, the Issuer and the Trustee of any
Subservicer Event of Default with respect to such Series upon actual knowledge
thereof by the Subservicer. Upon any termination of, or appointment of a
successor to, the Subservicer for a Series pursuant to this Article 7, the
Trustee shall give prompt written notice thereof to the Noteholders at their
respective addresses appearing in the Note Register.
Section 7.05. Waiver of Past Defaults. The Trustee shall, at the
direction of the Holders of Notes representing more than 66-2/3% in principal
amount of the Controlling Class of the Notes Outstanding of any affected Series,
on behalf of all Noteholders of such Series, waive any default by the
Subservicer in the performance of its obligations hereunder and its
consequences, other than a default with respect to required deposits and
payments in accordance with Article 3 or a default of the type set forth in
clause (iv) or (v) of Section 7.02(a) hereof, which waiver shall require the
consent of each Noteholder of such Series. Upon any such waiver of a past
default, such default shall cease to exist, and any Subservicer Event of Default
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon except to the extent expressly waived.
Section 7.06. Effects of Termination of Subservicer. (a) Upon the
appointment of a successor Subservicer for a Series, the predecessor Subservicer
shall remit any Scheduled Payments relating to such Series and any other
payments or proceeds that such predecessor may receive pursuant to any Contract
or otherwise relating to such Series to such successor after such date of
appointment.
(b) After the delivery of a Subservicer Termination Notice, the
outgoing Subservicer of a Series shall have no further obligations with respect
to the management, administration, servicing, enforcement, custody or collection
of the Contracts relating to such Series, and the successor Subservicer shall
have all of such obligations, except that the outgoing Subservicer will transmit
or cause to be transmitted directly to such successor Subservicer promptly on
receipt and in the same form in which received, any amounts held by the outgoing
Subservicer (properly endorsed where required for such successor to collect
them) received as payments upon or otherwise in connection with the Contracts
relating to such Series.
ARTICLE 8 MISCELLANEOUS PROVISIONS
Section 8.01. Termination of the Servicing Agreement. (a) Absent a
termination pursuant to Section 6.01 or 7.02 hereof, the respective duties and
obligations of the Servicer, the Subservicer, the Issuer and the Trustee created
by this Agreement shall terminate upon the discharge of the Indenture in
accordance with its terms; and the respective duties and obligations of the
Trustee shall terminate with respect to the Trustee in the event the Trustee
resigns or is replaced under Section 7.09 of the Indenture; provided, however,
that no resignation or removal of the Trustee and no appointment of a successor
Trustee shall become effective until the acceptance of appointment by the
successor Trustee under Section 7.10 of the Indenture. Upon the termination of
this Agreement pursuant to this Section 8.01(a), each of the Servicer and the
Subservicer shall pay all monies with respect to the Receivables and Credits
held by the Servicer or the Subservicer, as the case may be, and to which the
Servicer and the Subservicer or the Subservicer, as the case may be, is not
entitled, to the Issuer or upon the Issuer's order. Each of the Servicer's and
Subservicer's indemnification obligations pursuant to Section 5.01 hereof will
survive the termination of this Agreement.
(b) This Agreement shall not be automatically terminated as a result
of an Event of Default under the Indenture or any action taken by the Trustee
thereafter with respect thereto, and any liquidation or preservation of the
applicable Series Trust Estate by the Trustee thereafter shall be subject to the
rights of the Servicer to service the Receivables and to collect servicing
compensation as provided hereunder.
Section 8.02. Amendments. (a) This Agreement may be amended from
time to time by the Issuer, the Subservicer and the Servicer, with the consent
of the Trustee, and the Holders of not less than 66-2/3% in principal amount of
the Controlling Class of Notes Outstanding of each affected Series for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement; provided, however, that, with respect to
any Series, the number of Holders of such Series required for such consent shall
be modified as set forth in the related Series Supplement; provided, further,
that no such amendment shall, without the consent of each affected Noteholder
(i) alter the priorities with which any allocation of funds shall be made under
this Agreement; (ii) permit the creation of any lien on any Series Trust Estate
(other than the lien of the Indenture) or any portion thereof or deprive any
such Noteholder of the benefit of this Agreement with respect to the related
Series Trust Estate or any portion thereof; (iii) modify any provision herein
relating to the voting percentage of Noteholders necessary to grant consent or
give direction, or (iv) modify this Section 8.02 or Sections 6.02 or 6.04
hereof.
(b) Promptly after the execution of any amendment, the Servicer shall
send to the Subservicer, the Trustee, the Rating Agency and each Holder of the
Notes a conformed copy of each such amendment.
(c) It shall be necessary, in any consent of Noteholders under this
Section 8.02, to approve the particular form of any proposed amendment. The
manner of obtaining such consent and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Trustee may prescribe.
(d) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
Section 8.03. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York without regard to
conflict of laws principles and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.
Section 8.04. Notices, etc., to Trustee, Issuer, Servicer and
Subservicer. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with any party hereto
shall be sufficient for every purpose hereunder if in writing and telecopied or
mailed, first-class postage prepaid and addressed to the appropriate address
below:
(a) to the Trustee at 135 South LaSalle Street, Suite 1625, Chicago,
Illinois 60674 (facsimile number (312) 904-2084), Attention: Asset Backed
Securities Trust Services, TRI Funding II [specify Series], or at any other
address previously furnished in writing to the Issuer, the Noteholders, the
Servicer and the Subservicer; or
(b) to the Issuer at TRI Funding II, Inc., 3250 Lakeport Boulevard, Klamath
Falls, Oregon 97601 (facsimile number (503) 885-7454), Attention: Treasurer, or
at any other address previously furnished in writing to the Trustee, the
Noteholders, the Servicer and the Subservicer by the Issuer; or
(c) to the Servicer at Trendwest Resorts, Inc., 12301 N.E. 10th Place,
Bellevue, Washington 98005 (facsimile number (425) 990-2302), Attention:
Executive Vice President, or at any other address previously furnished in
writing to the Trustee, the Noteholders, the Subservicer and the Issuer; or
(d) to the Subservicer at Sage Systems, Inc., 2135 112th Avenue N.E., Suite
101, Bellevue, Washington 98004 (facsimile number (425) 462-0264), Attention:
President, or at any other address previously furnished in writing to the
Trustee, the Noteholders and the Servicer; or
(e) to the Rating Agency at Fitch Investors Service, L.P., One State Street
Plaza, New York, New York 10004 (facsimile (212) 480-4438), Attention:
Asset-Backed Securities or at any other address previously furnished in writing
to the Trustee, the Noteholders, the Subservicer, the Servicer and the Issuer.
Section 8.05. Notices and Other Documents to Noteholders; Waiver.
(a) Where this Agreement provides for notice to Noteholders of any event, such
notice shall be in writing and sent (i) by telefacsimile if the sender on the
same day sends a confirming copy of such notice by a recognized overnight
delivery service (charges prepaid), or (ii) by registered or certified mail with
return receipt requested (postage prepaid), or (iii) by a recognized overnight
delivery service (with charges prepaid). Any such notice to a Noteholder or its
nominee must be sent to (i) such Person at the address specified for such
communications in the Note Register, or at such other address as the Noteholder
shall have specified to the Trustee in writing and (ii) if specified, to such
other Person as shall be identified in writing to the Trustee by each Noteholder
or its nominee. The Trustee acknowledges receipt of Annex 1 to the Note Purchase
Agreement, which sets forth such information with respect to the initial
Holders. Notice under this Section 8.05 will be deemed to be given only when
actually received.
(b) Where this Agreement provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Noteholders shall be filed with the Trustee,
but such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(c) Any reports, documents or other communications other than notices
to be sent to Noteholders may be telecopied or mailed, first class postage
prepaid and shall be addressed to the Noteholders and their nominees and
designees, if applicable, as set forth in paragraph (a) above.
Section 8.06. Severability of Provisions. If one or more of the
provisions of this Agreement shall be for any reason whatever held invalid, such
provisions shall be deemed severable from the remaining covenants and provisions
of this Agreement, and shall in no way affect the validity or enforceability of
such remaining provisions, the rights of any parties hereto, or the rights of
the Trustee or any Noteholder. To the extent permitted by law, the parties
hereto waive any provision of law which renders any provision of this Agreement
prohibited or unenforceable in any respect.
Section 8.07. Binding Effect. All provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto, and all such provisions shall inure to the
benefit of the Noteholders. This Agreement may not be modified except by a
writing signed by all parties hereto.
Section 8.08. Article Headings and Captions. The article headings and
captions in this Agreement are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof.
Section 8.09. Legal Holidays. In the case where the date on which
any action required to be taken, document required to be delivered or payment
required to be made is not a Business Day, such action, delivery or payment need
not be made on such date, but may be made on the next succeeding Business Day.
Section 8.10. Assignment for Security for the Notes. The Servicer
understands that the Issuer will assign to and grant to the Trustee a security
interest in all of its right, title and interest to this Agreement. The Servicer
consents to such assignment and grant and further agree that all
representations, warranties, covenants and agreements of the Servicer made
herein shall also be for the benefit of and inure to the Trustee and all Holders
from time to time of the Notes.
Section 8.11. No Servicing Assignment. Notwithstanding anything to
the contrary contained herein, except as provided in Sections 5.02 and 5.04
hereof, this Agreement may not be assigned by the Issuer, the Seller, the
Subservicer or the Servicer (except with respect to the appointment of a
subservicer) without the prior written consent of the Holders of Notes
representing not less than 66-2/3% in principal amount of the Controlling Class
of the Notes Outstanding of each affected Series.
Section 8.12. Counterparts. This Agreement may be executed in one or more
counterparts all of which together shall constitute one original document.
Section 8.13. Duties of the Parties. This Servicing Agreement has
been drafted with the intent that one Person shall serve as Servicer, one Person
shall serve as Trustee, and one Person shall serve as Subservicer with respect
to all Series of Notes Outstanding. However, any Series may have a different
Person serving as Servicer, Trustee or Subservicer because of a resignation or
removal of such Person with respect to such Series. References to each of the
Servicer, the Trustee and the Subservicer shall be read so that each such Person
shall have the rights and duties of the Servicer, Trustee or Subservicer, as the
case may be, only with respect to each Series for which such Person serves in
such role.
IN WITNESS WHEREOF, the Issuer, Trendwest, the Servicer, the
Subservicer and the Trustee have caused this Agreement to be duly executed by
their respective officers or authorized signatories thereunto duly authorized as
of the date and year first above written.
TRI 6 FUNDING II, INC., as Issuer
By
Name:
Title:
TRENDWEST RESORTS, INC., as Servicer and for itself
By
Name:
Title:
SAGE SYSTEMS, INC., as Subservicer
By
Name:
Title:
LASALLE NATIONAL BANK, as Trustee
By
Name:
Title:
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EXHIBIT A
FORM OF
REPORT OF INDEPENDENT ACCOUNTANTS
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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.